Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

BRIGHTON CORPORATION BILL (By Order)

GREATER LONDON COUNCIL (GENERAL POWERS) BILL (By Order)

LIVERPOOL CORPORATION BILL (By Order)

Second Reading deferred till Thursday, 24th February.

Oral Answers to Questions — TECHNOLOGY

Computer Manufacturers (Research Collaboration)

Mrs. Shirley Williams: asked the Minister of Technology what steps he is taking to encourage the major firms in the British computer industry to coordinate their research and marketing divisions.

The Minister of Technology (Mr. Frank Cousins): The work and organisation of their research and marketing divisions is essentially a matter for the computer manufacturers concerned. My Department keeps in touch with the major computer manufacturers, however, and draws their attention to opportunities for co-ordination and collaboration, especially in research.

Mrs. Williams: In view of the fact that one country and one company in that country dominates the computer market, will my right hon. Friend bear in mind the need to get more economies of scale into the British industry to enable us to compete effectively?

Mr. Cousins: This is, of course, part of the approach which we have made to the computer industry as a whole and to particular countries. We know that a

comparable computer industry could be created in this country to take care of the problem which my hon. Friend raises.

Advanced Gas-Cooled Reactors

Mr. Leadbitter: asked the Minister of Technology what initiatives have been taken to press the sale of British advanced gas-cooled reactors in the United States of America, in view of the decision of the United States Atomic Energy Commission to abandon their experimental gas-cooled reactor at Oak Ridge and the failure of the Dragon-type reactors at Peach Bottom and Colorado.

Mr. Cousins: Every opportunity is taken to ensure that potential customers both in the United States of America and elsewhere are kept fully informed of the success of advanced gas-cooled reactors in the United Kingdom. For commercial reasons it would not be appropriate for me to comment at this stage on the further initiatives which are in hand or under consideration.

Mr. Leadbitter: I thank the Minister for his answer, but would he assure the House that the decision of the Atomic Energy Commission in America to withdraw the experiment in the gas-cooled reactor does not imply a lack of confidence in the concept? Will he, therefore, seek to exploit Britain's remarkable lead in this respect, particularly with our advanced gas-cooled reactor, with its opportunities for export and its contribution to the power supply programme?

Mr. Cousins: Of course, I would not want to attempt to answer for the U.S. Atomic Energy Commission, although our information is that their problems are not as great as has been suggested in some quarters. But the main point is that, on the basis of the highly successful exploitation of gas-cooled systems in this country, we have every reason for continued confidence. We shall make this known as widely as we can.

Mr. Webster: In view of the fact that the Oak Ridge project has a writing-down time of 30 years and that Dungeness has a 20-year depreciation, will the Minister press very hard on the European Nuclear Energy Agency for a common criterion on all these points?

Mr. Cousins: There are further Questions on this, but we are responsible for our own decisions about writing-down time.

Management and Production (Workers' Participation)

Mr. Freeson: asked the Minister of Technology what action his department is taking to increase workers' participation in the industries for which he is responsible, with a view to encouraging increased productivity, general efficiency and an improved industrial environment; and whether he will make a statement.

Mr. Cousins: My Department is represented on the Economic Development Committees for the industries for which I am now responsible. I regard these committees as a very important means for encouraging workers' participation in economic planning and in solving the particular problems of their industries.

Mr. Freeson: I thank the Minister for that sympathetic reply, but could he take the matter a little further? Would he agree that the question of participation by workers in management and productivity schemes requires more than sympathetic interest by the E.D.C.s and that we need this kind of participation if we are to make a more effective incomes and prices policy, not to speak of achieving an industrial democracy, which this party is aiming for?

Mr. Cousins: Yes, of course, it needs considerably more than just an examination by the little Neddies. It needs, in fact, a change of attitude by some people towards workers' participation. Very frequently, managements regard the workers as not being entitled to participate in examinations but only to be told what examinations have taken place. We have been trying for years to remedy this situation.

Sir H. Legge-Bourke: Arising out of the Minister's original reply, could he say what exactly is the rôle of the representatives of his Department on the Economic Development Committees? Are they there in a listening capacity or a participating one?

Mr. Cousins: They are there in a fully participating capacity. As the hon. Gentleman will be aware, these bodies

are non-executive: they examine and report back. But my representatives take a full part in them.

Atomic Energy Authority (Capital Works)

Mr. J. H. Osborn: asked the Minister of Technology on how many occasions since October, 1964 the Atomic Energy Authority has tendered for capital construction work, including research reactors and power station reactors worth over £50,000; what was the total value of these tenders; how many have been for export; how many have resulted in firm orders; if he will tabulate in the OFFICIAL REPORT the value of each tender which resulted in a firm order, give the name and customer and country in each case, name the main sub-contractors and the value of the sub-contracted work; and to what extent it is Government policy for the Atomic Energy Authority to expand its construction department.

Mr. Cousins: The Authority has recently submitted tenders to two Finnish electricity undertakings. This is the first time such action has been taken and details must, for commercial reasons, remain confidential to the parties concerned. If these tenders are successful, the construction and manufacture of equipment will be carried out by industry. Every encouragement will be given to the Authority's efforts to obtain export orders of this kind.

Mr. Osborn: I thank the Minister for that reply. Does it mean that the A.E.A. is setting up in competition against the consortia? Since there is a debate today on rationalisation, would he set an example by persuading the A.E.A. to concentrate on research and leave commercial matters to other hands?

Mr. Cousins: No, I certainly would not take that step. It is not in competition with them. It has the authority to do a job which I spoke about in the House some time ago. At the moment it is the only body which is able to put forward proposals and tenders for the S.G.H.W.R. Therefore, it would be improper for me to try to prevent that from happening—and surely all hon. Members want the Atomic Energy Authority to get these orders if it can.

Sea Water (Desalination)

Sir D. Renton: asked the Minister of Technology what progress has been made in research into the large scale desalination of sea water for purposes of public water supply; and whether he will make a statement.

Mr. Cousins: I cannot add anything further at present to the reply I gave the hon. Member for Poole (Mr. Murton) on 26th October.

Sir D. Renton: Is the right hon. Gentleman aware that, in view of the very large prospective increased demand on the public water supply, any money that he spends on research into desalinisation will repay itself many times? Will he please press on with this and give the House some idea of what is being done at present?

Mr. Cousins: I am certainly very conscious of the importance of this. It may not have escaped the notice of hon. Members that, when reporting on this issue, I mentioned that it was not just the arid countries, the deserts, which needed water, but the industrial countries. In some parts of this country, we are short of water. We are pressing on with this matter, and we have discussed with Weir Westgarth and others the things that can be done. It should be remembered that a design study for a 30 million gallons a day plant using flash distillation techniques has been completed in conjunction with that company and that we are pressing on to see whether this is really a commercial proposition.

Electronic Components (Exports)

Mr. Orme: asked the Minister of Technology what increase was obtained by the United Kingdom electronic components industry in production and exports in 1965 compared with 1964.

The Joint Parliamentary Secretary to the Ministry of Technology (Mr. Richard Marsh): Increases in exports obtained by the electronic components industry between 1964 and 1965 amounted to 15 per cent. for valves, tubes and semiconductors, where the figure rose from £12·4 million to £14·2 million and to just over 30 per cent. for resistors, capacitors and transformers, where the figure rose from £3·5 million to £4·6 million. There are at present no complete statistics of production for the industry.

Mr. Orme: While thanking my hon. Friend for giving those encouraging figures, may I ask him to say what steps his Ministry is taking to ensure that these are increased even further, particularly since we have the capacity in British industry to export the very things mentioned in the Question?

Mr. Marsh: The industry is entitled to be congratulated for its extremely good performance during the past year. However, there is still a great deal more that we can do from the point of view of the country and the industry to make ourselves even more competitive.

Mr. Biffen: In view of the interest there is in this subject, would the hon. Gentleman represent to his right hon. Friend the President of the Board of Trade the desirability of collecting these statistics so that one may determine to what extent they are accounted for by British companies which are the subsidiaries of American parents?

Mr. Marsh: I agree with the hon. Gentleman that the keeping of statistics in this sphere is not satisfactory at present. That is being reviewed now with a view to putting them on a better footing, although I cannot resist returning to the point that it is a pity the statistics were not reviewed a long time ago.

National Data Processing Service

Mr. Wellbeloved: asked the Minister of Technology what progress is now being made in the establishment of a national data processing establishment with a computer field.

Mr. Cousins: The possibilities of establishing a national data processing centre are being studied.

Mr. Wellbeloved: Would the Minister not agree that the establishment of such an organisation would be of great benefit to industry and commerce in making them more aware of the great benefits which can be derived from this sort of service?

Mr. Cousins: I certainly accept that this is a valuable contribution to make and that the knowledge to be gained by industry would be extremely useful. However, a great deal has yet to be learned about the idea of a central data processing


system. Hon. Members who have been to America, as has my opposite number on the Front Bench opposite, will agree that a lot remains to be done with M.A.C.

European Nuclear Energy Agency (Computer Programmes)

Mr. Webster: asked the Minister of Technology how many nuclear energy computer programmes this country provides to the European Nuclear Energy Agency establishment at Ispra; and what is the cost of these.

Mr. Marsh: Nuclear energy computer programmes collected by the Ispra Establishment relate solely to fundamental scientific and engineering problems in the nuclear field. The United Kingdom has provided 32 such programmes at a negligible cost.

Mr. Webster: I thank the hon. Gentleman for saying that it is a negligible cost. Will he accept that out of the 272 programmes which have been made available to Ispra, it is a pity that we have had such a small proportion? Is he aware that this could be potentially very big business for this country in the next five years?

Mr. Marsh: I certainly would not accept that our contribution has been such a very small one. If one takes all the E.N.E.A. countries and bears in mind that about 121 programmes have been submitted by all of them and that of those 32 came from the United Kingdom, that is a fairly good proportion.

Mr. Webster: asked the Minister of Technology what reply he has sent to the letter of the hon. Member for Weston-super-Mare regarding the number of computer programmes that have been sent to the European Nuclear Energy Agency establishment at Ispra.

Mr. Marsh: I have sent a detailed reply to the hon. Member's letter of 9th February.

Mr. Webster: I thank the hon. Gentleman for that reply, which I received about one minute ago. Considering that 699 programmes have been offered—of which the hon. Gentleman stated earlier that one-tenth had been offered by this country—is he aware that, as we are one of the leading countries in the nuclear energy sphere, this is not good enough?

Mr. Marsh: To answer the last point made by the hon. Gentleman, one should not go to too much trouble to underplay the achievements of this country. There are 11 countries in E.N.E.A., and three of them are major ones in these activities. I repeat that our contribution is good and that we hope to increase our proportion of programmes offered, but I would not like to say, without notice of the question being given, by how much. The important thing to bear in mind is the number of programmes accepted.

Numerically Controlled Machine Tools

Mr. Orme: asked the Minister of Technology what estimates exist of the number of men it would be possible to replace by the use of numerically controlled machine tools; and how many men it is estimated have been displaced in 1965.

Mr. Marsh: For a considerable time to come, numerically controlled machine tools, so far from replacing men, will be required to enable industry to meet the essential need for increased production in the face of serious shortages of skilled manpower, and to achieve the increased efficiency necessary to make this country competitive in world markets.

Mr. Orme: What assessment has my hon. Friend's Department made of the need for numerically controlled machine tools in this country and what recommendations is it making to the machine tool industry in this regard?

Mr. Marsh: It is difficult to arrive at a precise assessment of the need. There is clearly a great deal more room for an increase in the use of numerically controlled machine tools. One of the important things to get across, as I said in my original Answer, is that the introduction of numerically controlled machine tools and other automated systems does not endanger the employment of men. In fact, this will not involve any redundancies.

Mr. Woodnutt: Would the Minister also make it clear that numerically controlled machines are useful in only about 5 per cent. of cases? Is it not the case that for long, high productivity runs numerically controlled machine tools have no use at all? Would he not also


draw attention to the fact that the British machine tool industry has more numerically controlled machine tools in use pro rata than the United States' machine tool industry? Will he also inform his hon. Friends that the British machine tool industry has organised an exhibition of numerically controlled machine tools at Olympia from 2nd to 9th May, which they should visit?

Mr. Marsh: The last point made by the hon. Gentleman is quite true. An exhibition is to take place and my Ministry is assisting in it. It would be a mistake to believe that numerically controlled machine tools or any other such method will provide the answer to our problems. However, it is certainly a major factor which we must get used on a much wider scale than has been the case in the past.

Several Hon. Members: rose—

Mr. Speaker: Order. We must improve our productivity on technology Questions.

Mono-wheel-drive Tractor

Mr. Atkinson: asked the Minister of Technology what progress has been made with the mono-wheel-drive tractor initiated by the National Institute of Agricultural Engineers; and what discussions have taken place concerning its commercial exploitation.

Mr. Marsh: Discussions are now in progress between the National Research Development Corporation and a commercial firm for the licensing of this invention for production. The first stage however will probably be the production of prototypes for trials under the auspices of the Ministry of Overseas Development.

Mr. Atkinson: I congratulate my hon. Friend on that first-class reply. Is he aware that this is one of the outstanding illustrations of what the Labour Party promised in their manifesto, in which it was stated that a Labour Government would make provision for and use their resources on developing ideas of this kind? Would my hon. Friend look into the possibility of exhibiting this at the Leipzig Spring Fair?

Mr. Hogg: Would it not save the time of the House, when the object of a supplementary question from an hon. Gentleman opposite is simply to congratulate the Government, for him simply to say, "Supplementary No. 1"?

National Research Development Corporation (Joint Projects)

Sir H. Legge-Bourke: asked the Minister of Technology, what is his policy regarding the co-operation with foregin investors by the National Research Development Corporation in joint projects based in the United Kingdom.

Mr. Cousins: There are at present no N.R.D.C. projects of this kind, but any proposals for such projects will be considered on their merits.

Sir H. Legge-Bourke: Will not the Minister agree that, in the interest of getting European co-operation on the technological front, he should only welcome any attempts made by foreign investors with venture capital to work in conjunction with the N.R.D.C.?

Mr. Cousins: It is very difficult to give an answer on this subject without having a particular case in front of us. If the hon. Gentleman has in mind the fact that certain people try to invest money simply in order to have control without any question of development, that is a dangerous position. But it is not easy to see how the N.R.D.C. could say that it would not consider projects because they had foreign capital in them.

Mr. Marples: Can the Minister assure the House that if any European companies wanted to take a small participation in something in this country the N.R.D.C. would not automatically exclude them?

Mr. Cousins: Certainly. It would not only not exclude them but welcome them, and there are projects which we consider.

Large Computers

Sir H. Legge-Bourke: asked the Minister of Technology what action he is taking in respect of the recommendations contained in paragraphs 12, 13, 14, and 286 of the Flowers Committee Report, Command Paper No. 2883, to the effect that large United States computers should be installed at the regional centres in London, Manchester and Edinburgh.

Mr. Cousins: Discussions have been held with British computer manufacturers about the way in which the need for a


number of large computers for the universities and other users might be met by the development of British-made machines.

Sir H. Legge-Bourke: In view of the difficulty which Control Data Computer Company is having with its large computer at C.E.R.N., and in view of the statement by I.B.M. that it is not prepared to hire its computers but only accept firm orders for purchase, will the Minister consider whether or not there is now a case for having them made in the United Kingdom?

Mr. Cousins: We have, as hon. Members opposite know, pressed all the time for the right of British computer manufacturers to supply our needs, but the suggestion that they should supply all our needs is something which I think neither side of the House would accept. In the discussion of the Flowers Report, it was accepted that they could supply the medium and small computers but that some of the larger ones could not be supplied by them. We are hoping to encourage large computer production by the manufacturers involved.

Machine Tools

Mr. Biffen: asked the Minister of Technology if he has received a report on the cyclical pattern of machine tool ordering from the working party appointed to study this subject; and if he will make a statement.

Mr. Cousins: I expect to receive the working party's report within the next few weeks. I shall consider making a statement when I have received it.

Mr. Biffen: Is the Minister aware that that is a thoroughly unsatisfactory and disappointing Answer? Is he aware that on 7th December he told us that he expected to receive this Report "very shortly"? Is he aware that he is establishing an unhappily ponderous and disappointing gestation period for reports of the Ministry of Technology?

Mr. Cousins: As what could be described as a final draft Report has not yet been agreed by the members of the working party, it is obviously impossible for me to talk about it, but I have said that I intend to bring this Report forward

as soon as it can possibly be done. As one would expect, hon. Members on both sides have asked me to give the closest consideration to the matter before taking decisions, because of the complicated nature of the problems facing the machine tool industry.

Public Purchasing (Interdepartmental Study)

Mr. Biffen: asked the Minister of Technology if he has received the conclusions of the interdepartmental inquiry initiated by his Department on the use of public purchasing to promote technological advance; and if he will make a statement.

Mr. Cousins: The possibilities of using public purchasing to promote technological advance will be the subject of continuing interdepartmental study. I will bear in mind the desirability of making a statement at the appropriate time.

Mr. Biffen: Is the right hon. Gentleman aware that we have noted with great interest that technological considerations may be one of the matters attracting the employment of funds by the Industrial Reorganisation Corporation? Will he therefore consider the desirability of making public the finding of this interdepartmental inquiry so that we can better judge the criteria by which the Government hope to employ their funds?

Mr. Cousins: As is known by both sides, when an inquiry is conducted by officials it is normally accepted as confidential to Ministers, but that does not mean that at some stage the findings will not be made known in some appropriate report and information put in front of this House. But this is not a single report, but a comprehensive and continuing report, of which there are some aspects that no one would think of bringing forward to the House.

Research Establishments (Minister's Visits)

Mr. Longbottom: asked the Minister of Technology whether he will make a statement on his visits to, and the work done at, the Government research stations for which his Department is responsible.

Mr. Cousins: I would refer the hon. Member to my answer to the hon. Member for Devizes (Mr. Charles Morrison) on 3rd February, in which I gave details of my visits to Ministry of Technology and Atomic Energy Authority Establishments. Information on the work done at these establishments is contained in the annual reports published by the Stationery Office of the Atomic Energy Authority and of the Ministry of Technology establishments.

Mr. Longbottom: Is the right hon. Gentleman aware that we have read this very small list of visits he has made, and will he tell the House whether he has taken any action as a result of what he has seen on these visits?

Mr. Cousins: Hon. Members may have read the list, but what has happened is that I have been familiarising myself with the activities of the very comprehensive group of establishments I have covered in my visits. In order that I can make the best use of this information I have discussed it with the Advisory Council on Technology and the industries concerned, because the value of technology is that we should use it for making sure that what requires to be done shall be done by an economic method.

Mr. Hector Hughes: In particular, would my right hon. Friend say what are his plans, in view of the new prototype reactor established near Dounreay experimental station, for the purpose of bringing more power to Aberdeen—[Interruption.]

Mr. Speaker: Order. The hon. and learned Gentleman must not wait so long for the applause and take a bow. We must move on.

Mr. Cousins: I am at a disadvantage in not being able to see the bow, Mr. Speaker. But, of course, the object of the exercise we conducted in the House last week was first to agree on getting it built.

Mr. Hughes: On a point of order, Mr. Speaker. You implied that the applause was actuated by me. It was quite spontaneous.

Mr. Speaker: It may have been spontaneous, but we must move on.

Computer Staff

Mr. Longbottom: asked the Minister of Technology what estimates he has made of the shortage of computing staff in Great Britain.

Mr. Marsh: There are no precise figures, but there are currently shortages of most types of computer staff. The immediate pressures are for programmers and systems analysts with three or four years' experience. We are planning in conjunction with the Department of Education and Science to see that the educational system is geared to meet future requirements.

Mr. Longbottom: What immediate steps, other than the National Computer Centre—which seems rather a paper tiger—does the Minister intend to take to deal with this serious situation?

Mr. Marsh: I must first make the point that the serious situation arises because there is an insufficiency of people with three or four years' experience. The blame for that can hardly be laid on this side of the House. Secondly, it would be regrettable for hon. Members opposite to start underplaying the value of the National Computing Centre before it has even had time to go into action. Thirdly, the Department of Education and Science has set up a group to deal exclusively with the whole, question of computer education.

Mr. Snow: Is my hon. Friend aware that the chairman of one very large British computer manufacturing organisation takes the view that the training of this highly qualified staff should be a joint venture with the other companies, including the large American company to which I think he referred a moment or two ago, and that directors of education should be better informed about the capacity of these firms?

Mr. Marsh: We have in the Ministry a computer advisory group which is discussing this problem, not only with British computer companies but with American companies as well, because we all have an interest in getting as many of these people as possible.

Mr. Marples: But can the hon. Gentleman assure us that the existing computer staff is being used in the most economical


way? In other words, can he assure us that the Government, the local authorities and the nationalised industries are not using these scarce scientific people and having their efforts duplicated over various authorities?

Mr. Marsh: There is a great distance to go before we use either computers or people to the fullest extent here. If the right hon. Gentleman has any specific cases in mind, we will certainly be prepared to look at them.

Railway Industry

Mr. Marten: asked the Minister of Technology what progress he has made in his consideration of longer-term developments in the application of modern tech nology to the railway industry.

Mr. Cousins: I have nothing to add to the answer I gave the hon. Member on 8th February.

Mr. Marten: Does the Minister recall the statement by the Prime Minister on 26th November, 1964, when he was charged with stimulating advanced technology throughout the whole of industry? Does he recall a recent statement when he limited that to stimulating advanced technology into industries for which he has sponsorship? Can he explain to the House this important difference?

Mr. Cousins: If the hon. Member is addressing a question to me of why the Prime Minister made a difference—if it is suggested he did so in the comments he made—that question might be addressed to the Prime Minister. There has never been any misunderstanding about the functions of the Minister of Technology. The Prime Minister has repeatedly said that departmental Ministers are not absolved from responsibility for productivity within the industries for which they accept sponsorship.

Hovercraft

Mr. Gresham Cooke: asked the Minister of Technology what is the total value of public sector purchases of Hovercraft at the most recent convenient date; and what is the estimated value of similar public sector purchases during the current year.

Mr. Marsh: Up to 31st March, 1965, the total value of public sector Hovercraft

purchases was in the region of £1·8 million. Expenditure for the current financial year is estimated to be small and limited to ancillary equipment for craft delivered in previous years.

Mr. Gresham Cooke: In view of the recent naval trials of Hovercraft in Borneo, has the hon. Gentleman or his right hon. Friend had discussions with the Ministry of Defence about taking up Hovercraft for defence purposes?

Mr. Marsh: Hovercraft are already being used for defence purposes. They have been bought by the Ministry of Aviation and the Ministry of Defence, and one would hope to see an increase in this. We are still evaluating the full range of possibilities of this particular craft.

Mr. Edward M. Taylor: asked the Minister of Technology what discussions he has had with overseas organisations developing the Hovertrain; and what consideration has been given to collaborating with such organisations.

Mr. Marsh: Hovercraft Development Limited, a subsidiary company of the National Research Development Corporation, which is engaged on development work in connection with tracked Hovercraft, is keeping in close touch with developments overseas.

Mr. Taylor: Would not the Parliamentary Secretary agree that all forms of public transport in this country are facing very serious problems and that there is a need for this country to follow the initiative of France in trying to promote a new form of public transport like this?

Mr. Marsh: I think that the key is in the last half of the hon. Gentleman's supplementary question. This is a new form of transport. There are many forms of modern tracked craft other than Hovercraft.

Mr. McMaster: asked the Minister of Technology what plans he has for developing the manufacture of Hovercraft.

Mr. Marsh: The development and manufacture of Hovercraft for civil use is primarily the responsibility of the industry, which will continue to have the co-operation of the National Research Development Corporation. Development


for military use is the responsibility of my right hon. Friend the Minister of Aviation.

Mr. McMaster: Will the Parliamentary Secretary look into the possibility of producing this craft in Northern Ireland where some 4,000 skilled aircraft engineers are faced with unemployment over the next 12 months as a result of the Government's policies?

Mr. Marsh: If there were any particular aviation company in Northern Ireland which the hon. Gentleman had in mind and if such a company was interested, it should contact the manufacturers or the Ministry of Aviation.

Mr. Gresham Cooke: Could not the Navy be allowed to buy a few Hovercraft in place of aircraft carriers?

Mr. Grimond: Is the Parliamentary Secretary aware that this is one of the most promising adventures in British industry? Is his Ministry assisting at any rate in experimenting with the
existing Hovercraft to find what possible uses there are for it, because it is
one of the great break-throughs by British industry and is exactly the sort of thing the Government should be backing?

Mr. Marsh: It is a very great breakthrough for British industry. It is an outstanding example of the benefits of public intervention in this field. The Government are giving all the assistance they can to ensure that it is developed to the maximum degree.

National Computing Centre (Staff)

Mr. Pym: asked the Minister of Technology what progress has been made with staffing the National Computing Centre; and how many people are now employed.

Mr. Cousins: I would refer the hon. Member to my reply to the hon. Member for Oswestry (Mr. Biffen) on 11th February.

Mr. Pym: Will the Minister say whether he is experiencing any difficulty in recruiting people whom he described on that occasion as "top level"? In view of the fact that his initial statement about setting up this new organisation was made nearly a year ago, is he satisfied

with the progress which has been made?

Mr. Cousins: It was not, of course, nearly a year ago. The answer to the first part of that supplementary question is that there is considerable difficulty in finding staff because staff is in short supply. We are not having particular difficulty at this place. The Director-designate is in possession and has been spending part of his time keeping up with the planning of the centre. There are no problems which are not natural when one sets up a new organisation.

Renfrewshire (Linwood)

Mr. Buchan: asked the Minister of Technology what consideration has been given to establishing science-based industry in the Linwood area of Renfrew shire which could take advantage of the potentialities of the existing industrial complex there.

Mr. Marsh: The proper distribution of industry is the responsibility of my right hon. Friend the President of the Board of Trade.

Mr. Buchan: Is my hon. Friend not not aware that at the Board of Trade there is a pretty large file on this in my name? Will he keep in mind that this industrial complex is unique in Scotland in that it can serve a large variety of industry, but it lacks a science-based industry? Since private industry has failed to establish this, is it not time that we asked the public sector to do it under his Department?

Mr. Marsh: I do not think there is any question about the Government being fully alive to the need to have a completely balanced industrial base in the area which my hon. Friend represents, but this particular question of distribution of industry is the responsibility of another Ministry.

Russia (Minister's Visit)

Mr. J. H. Osborn: asked the Minister of Technology what is the purpose of his visit to Russia.

Mr. Cousins: In order to have discussions on British and Soviet policies and methods for stimulating the use of advanced technology, and on the ways in


which the country can best benefit from the technological exchange provisions of the existing Cultural Agreement with the Soviet Union.

Mr. Osborn: Is the Minister aware that we on this side of the House welcome any technological visit to Russia? Can he say exactly what establishments he will visit, whom he hopes to meet, and if he will make a statement on his return?

Mr. Cousins: I am not in a position to say exactly what establishments I shall be visiting. The primary purpose is to have discussions with those involved. As the hon. Member knows, there have been exchanges. Because the Russians have been over here more frequently than we have been there, it was thought desirable that I should go to have discussions.

Mr. Hogg: While wishing the right hon. Gentleman every success in his visit, may I ask if he will bear in mind the tendency of the Russians to play their technological cards very close to their chests? Will he press upon them the need for reciprocity in giving information which is as valuable as that which they get from us?

Mr. Cousins: I accept that the right hon. and learned Gentleman was genuinely saying that he welcomes the idea that I should go on this visit. We are conscious of the fact that the Russians tend to want to find out rather than to give information, but we hope that as a result of the visit we shall have a mutually satisfactory exchange of experts. This is the purpose of my visit.

Computer Industry

Mr. Marples: asked the Minister of Technology when he expects to make a statement on the future of the computer industry.

Mr. Cousins: Good progress is being made with the Government's measures for the British computer industry and to promote the use of computers in Britain. I see no need for a further statement at present.

Mr. Marples: Has the right hon. Gentleman received any report from the Maddock Committee on this?

Mr. Cousins: Yes, but that is not the nature of the Question. If an hon. Member

asks an entirely different supplementary question, it seems that he should put it down as the primary Question.

Electronics and Telecommunications

Mr. Younger: asked the Minister of Technology if he will make a statement on the results of his sponsorship of the electronics industry.

Mr. Gower: asked the Minister of Technology what are the results to date of his sponsorship of the telecommunications industry.

Mr. Cousins: The principal function of my Department as sponsor for these industries is to establish and maintain close contact with them in all day-to-day and longer term matters. This is a continuing process ranging over all the activities of these industries. If the hon. Members have any specific matters in mind and will put down Questions, I will try to answer them in detail.

Mr. Younger: Is the Minister aware that there is widespread disappointment with the results he has so far achieved in this industry? Is he aware that these are centred, in particular, on the lack of frequency in contact with the industry and the quality of that contact when it comes? Can he explain to the House how on earth it came about that he allowed his right hon. Friend to let office equipment go without investment allowance under the new scheme?

Mr. Cousins: The final part of that supplementary question is a separate question and needs to be put on the Order Paper. It is not a question for this Minister. To suggest that the industry is distressed at the nature of its contacts and the frequency of association is just not to understand what the industry is doing with us. Hon. Members opposite asked me in the first instance—because of the complicated nature of these two industries—not to rush into making statements of what we would do with them, but to study closely what is possible. Study contacts have been taking place into the possible use of metal oxydised semi-conductor transistorised equipment, which is an important aspect of equipment development. It cannot be said that in what we are doing we are not taking action.

Mr. Gower: In view of the fact that the right hon. Gentleman has assumed the sponsorship of these industries, can he say how we can assess the value of that sponsorship unless he gives further progress reports from time to time?

Mr. Cousins: There is a little misunderstanding about what sponsorship is. Sponsorship means that industries which have problems can come to the Minister and get guidance to deal with them. I do not have to make a statement every time any of them comes to me. I apologise that this answer is slightly longer, but this is a technical and difficult problem which is bound to call for a long answer.

Mr. Woodburn: Is my right hon. Friend aware that, whatever may happen to hon. Members opposite, the leaders of industry who sat with them on these committees before he became a Minister understand that he understands the job and is doing it very well indeed?

Mr. Biffen: The right hon. Gentleman said that industries will come to him when they have problems. Can he tell the House if he has had such an approach made by the electronics industry about the Government's aircraft procurement policy, and what answers he gave?

Mr. Cousins: They have not approached us about procurement policy in the detailed sense. They have done so in the broad sense. When one examines procurement policy it is not so easy to define what action should be taken over the whole range of industry.

Research Expenditure (Information)

Mr. Gower: asked the Minister of Technology to what extent it is his policy to keep the House of Commons informed about the expenditure of public money on research projects by the Atomic Energy Authority.

Mr. Cousins: It is my policy, as has been the practice since the inception of the Atomic Energy Authority, to inform the House of its major civil research projects. Information about the Authority's research programmes are set out in its Annual Report, copies of which are laid before the House.

Mr. Gower: Can the right hon. Gentleman say what proportion of the projects are in matters not connected with the Atomic Energy Authority?

Mr. Cousins: This is not listed, but if a detailed Question were put down on it I should try to answer it.

Machine Tool Industry

Mr. Edward M. Taylor: asked the Minister of Technology to what extent his sponsorship of the machine tool industry extends to British subsidiaries, fully owned or otherwise, of overseas principals; how many such subsidiary companies there are in this country; and what contacts he has with them.

Mr. Cousins: The answer to the first part of the Question is completely; to the second, that my Department has been able to identify 22 companies engaged in machine tool production in which there are overseas interests; and to the third that I have met representatives of a number of these companies and have been in correspondence with others.

Mr. Taylor: Could the Minister say if in allocating or giving advice on Government contracts he gives preference to British-designed goods manufactured by British companies, as opposed to American-designed products manufactured under licence in Britain?

Mr. Cousins: To ask if one gives preferential advice and guidance is rather to suggest that one does not give the correct kind of advice to somebody if foreign capital is involved. We have discussed in the House on a previous occasion how one tries to determine what is foreign capital in view of the nature of the White Paper on investment policies carried out by major international companies. We would naturally prefer to support British firms, but this does not mean that we do not accept exclusions.

Machine Tool Industry Research Association

Mr. Onslow: asked the Minister of Technology what increased financial support has been given or promised to the Machine Tool Industry Research Association since October, 1965.

Mr. Marsh: None, Sir.

Mr. Onslow: Does not that show that the machine tool industry is justified in feeling great disappointment at the misleading impression created by the Parliamentary Secretary last November that increased support would be forthcoming immediately?

Mr. Marsh: I do not think that the hon. Gentleman quite understood the Question. The M.T.I.R.A. can obtain grants from the Ministry at the rate of 75 per cent. of its grant-earning income from other sources, provided this reaches a minimum of £80,000 a year. The maximum grant from the Ministry has been increased from £80,000 to £120,000 a year. This is a sizeable increase, even on the hon. Gentleman's arithmetic.

Underwater Engineering Projects

Dr. Wyndham Davies: asked the Minister of Technology what plans his Department has for stimulating the technology of underwater engineering projects.

Mr. Marsh: The Atomic Energy Authority and the appropriate research stations in the Department are keeping in touch with the technological problems and possibilities.

Dr. Davies: Is the Parliamentary Secretary aware that there are great developments going on in underwater technology and engineering which could be of the utmost benefit to the shipbuilding industry and engineering industries?

Mr. Marsh: I certainly accept that. There are a number of other bodies as well as this Ministry involved in this matter. In addition to the Ministry's stations—the Ship Division of the N.P.L. and the Hydraulics Research Station at Wallingford—there are Government centres outside the Ministry with an interest in this technology, particularly the National Institute of Oceanography and the Admiralty.

Management Education

Rear-Admiral Morgan Giles: asked the Minister of Technology what discussions he has had on the need for an extension of management education in the introduction of new techniques into British industry.

Mr. Marsh: My right hon. Friend has had no formal discussions on this matter,

but many of the activities of his Department are directed towards improving management efficiency and the introduction of new techniques.

Rear-Admiral Morgan Giles: In what sectors of industry has the Minister direct responsibility for management education?

Mr. Marsh: The prime position of management education is that this will be mainly dealt with under the Industrial Training Act. There is an inter-departmental committee, of which I am chairman, covering the whole range of training, and recently the Central Training Council established under the Industrial Training Act issued a statement to the effect that it had set up a specific Committee to look at this one problem of management education, which the Government regard as very important.

Oral Answers to Questions — MINISTRY OF POWER (PARLIAMENTARY SECRETARY)

Mr. Peyton: asked the Prime Minister if he will take steps to appoint as a second Parliamentary Secretary to the Ministry of Power a member of the House of Commons.

The Prime Minister (Mr. Harold Wilson): No, Sir.

Mr. Peyton: Does not the Prime Minister think that his right hon. Friend is in serious need of assistance? Will he explain to the House why the Government have rejected what he himself described as a national fuel policy in favour of the much criticised policy which was followed by the former Administration?

The Prime Minister: That is not the position as put forward by my right hon. Friend. I am asked here, as I always am by hon. Members opposite, to increase the number of Ministers. If I thought that my right hon. Friend had any formidable opposition to face, I might consider it.

Oral Answers to Questions — PRIME MINISTER (OVERSEAS VISITS)

Mr. Eldon Griffiths: asked the Prime Minister how many days he has spent out of Great Britain since his appointment.

The Prime Minister: Twenty-three days, Sir.

Mr. Griffiths: Is there not a risk that these frequent visits by the Prime Minister are devaluing the rôle of the Foreign Secretary? Does it not also suggest that we are in some danger of moving towards a presidential form of Government?

The Prime Minister: No, Sir. Indeed, I think that a number of these visits have been pressed on me, quite rightly, by right hon. Members opposite. On some of these visits, we were dealing with a presidential form of Government, and it was necessary—in addition to the many more frequent visits of my right hon. Friend the Foreign Secretary, who goes to talk to his opposite numbers—for me, for example, to meet President Johnson and President de Gaulle as well as other heads of Government.

Oral Answers to Questions — NUCLEAR WEAPONS (INTERNATIONALISATION)

Mr. Blaker: asked the Prime Minister what is the policy of Her Majesty's Government regarding inter-nationalisation of all Great Britain's military aircraft capable of delivering nuclear weapons.

Mr. Marten: asked the Prime Minister if he will make a statement about the defence talks in Washington at the end of January in so far as they concern the internationalising of Great Britain's nuclear deterrent outside the North Atlantic Treaty Organisation area.

The Prime Minister: I have described our policy on internationalising our nuclear weapon systems on a number of occasions and have nothing to add now.

Mr. Blaker: Is the Prime Minister aware that when he first described the A.N.F. proposal to the House he said that it would not include bombers required to meet commitments outside the N.A.T.O. area, but on 25th January of this year he gave the impression that all our bombers would be internationalised? How does he reconcile those two statements?

The Prime Minister: Obviously the Atlantic Nuclear Force, which would

normally be expected to relate to the Atlantic, would not refer to bombers in areas other than the Atlantic. That was made clear in December, 1964. It was in December, 1964, that I said that they would need to be internationalised, too.

Mr. Marten: Would the Prime Minister elaborate what he has already said by telling the House with whom he proposes to internationalise such of our deterrent force as is outside the N.A.T.O. area?

The Prime Minister: With those allies who are relevant. I would ask the hon. Gentleman to await the Defence White Paper to find out a little more.

Mr. Zilliacus: Will the Prime Minister give an assurance that when visiting Moscow he will not jeopardise the chances of a non-proliferation agreement by insisting upon the inclusion of Germany in an international nuclear force of any capacity?

The Prime Minister: When I visit Moscow I shall stick to the position explained by my right hon. Friend the Foreign Secretary in the House and in New York so far as proliferation is concerned.

Mr. Heath: As the Prime Minister told us a fortnight ago that if the Government were to purchase the F111 they would also be internationalised, can he now tell the House what decision the Government have reached on the purchase of the F111?

The Prime Minister: The right hon. Gentleman will no doubt await the publication of the Defence White Paper. [HON. MEMBERS: "Oh."] Certainly. The Government have carried through a very big defence review. We have faced up to the issue that right hon. Members opposite fluffed year after year.

Mr. Heath: As every newspaper today is full of what purports to be the Government's decision, and as the Secretary of State for Defence is apparently leaving for Washington tomorrow to inform the Americans of the Government's decisions, why should not the Prime Minister tell the House of Commons now?

The Prime Minister: If the right hon. Gentleman believes everything he has


read in this morning's newspapers, including long accounts of Cabinet meetings which I did not attend—perhaps they took place elsewhere—[HON. MEMBERS: "Oh."]—I attended the real Cabinet, not the one the right hon. Gentleman has been talking about and reading about in the newspapers. I would advise the right hon. Gentleman to wait for the White Paper, which is the usual tradition and which was the tradition followed by the last Government. He will then have full facilities to debate it.

Oral Answers to Questions — BOND WASHING (STOCK EXCHANGE INQUIRY)

Mr. William Hamilton: asked the Prime Minister if he will initiate an inquiry into the extent and desirability of the practice whereby infringements or evasion of statute law are dealt with in secret outside the law courts by private bodies, with a view to introducing legislation to stop this practice.

The Prime Minister: If my hon. Friend is referring to the recent Stock Exchange investigation into bond washing, the inquiry was necessary since it concerned breaches of Stock Exchange rules designed to facilitate the enforcement of the statutory provisions. As my hon. Friend knows, the Inland Revenue is making a comprehensive investigation of these transactions.

Mr. Hamilton: Does not my right hon. Friend agree that it is a thoroughly dangerous practice that what is, in effect, a private court should sit in private, without knowledge by the public, and impose penalties on people who have, so far as I know, no right of appeal from that court? Will my right hon. Friend undertake to see that these people pay the taxes which they are now evading to an enormous extent and that the necessary action is taken by a public body accountable to this House?

The Prime Minister: That raises several questions. Where there was a breach of the Stock Exchange's own regulations, it was entirely appropriate for the Stock Exchange to inquire into it. If there is any question of an evasion of taxation—I use the word "evasion", meaning a breach of the law—this is a matter for the Inland Revenue to deal with. Third,

if it is a question of tax avoidance because the law was not drawn tightly enough, this will be a matter for legislation. But I think that the lesson of the whole business is that some people in the City, at any rate, might be better employed trying to help the export trade and to meet this country's industrial requirements rather than spending all their time on activities of this sort.

Sir J. Rodgers: Will the Prime Minister agree that the Stock Exchange is to be commended for the action it took in putting its own house in order and taking this action against a breach of its own regulations and rules?

The Prime Minister: As I said, I think that the Stock Exchange was right to inquire into any breaches of its own regulations, and, if those regulations need tightening, I hope that the Stock Exchange will take whatever action is necessary. That is for the Stock Exchange. The question of breaches of the law or the dodging of taxes is a matter for the Inland Revenue.

Oral Answers to Questions — NORTH ATLANTIC TREATY ORGANISATION

Mr. Longden: asked the Prime Minister if he is aware that the North Atlantic Treaty Organisation is in danger of disintegrating through French policy; and what proposals he has for ensuring the continuance and strengthening of this Organisation which is essential for the defence of the West.

The Prime Minister: I do not share the hon. Member's premise. The rest of his Question does not, therefore arise.

Mr. Longden: Will the Prime Minister agree that the future of N.A.T.O. must very largely depend upon the future of Europe, which, when I put this Question down, was in danger from French insularity, and will he at least take this opportunity of repeating the Foreign Secretary's recent declaration of intent, that "the result we all desire is to bring together the E.F.T.A. and the E.E.C."—

Mr. Speaker: Order. The hon. Gentleman must not make quotations in asking a supplementary question.

Mr. Longden: Perhaps the Prime Minister knows the declaration of intent


to which I was referring. Will he, please, repeat it now?

The Prime Minister: I know the declaration of intent. I dealt with it and confirmed it last week in relation to a number of Questions on the Common Market. But, obviously, the hon. Gentleman forgets that the Question he has put down is about N.A.T.O. and not about the E.F.T.A. and Common Market relationship.

Lady Tweedsmuir: Will the Prime Minister say whether he has now come to a decision on any German position within the nuclear committee of N.A.T.O.?

The Prime Minister: No, Sir; this is a matter which is being debated within the appropriate organs of N.A.T.O. The noble Lady knows why there was such a long delay last year which prevented its being debated earlier.

Oral Answers to Questions — MINISTER OF LABOUR (SPEECH)

Mr. Stratton Mills: asked the Prime Minister whether the public speech by the Minister of Labour at Ilford on 8th January on economic affairs represents Government policy.

The Prime Minister: Yes, Sir.

Mr. Mills: I congratulate the Minister of Labour on the speech, but is it not becoming clearer every day that the incomes policy stands very little chance of success while under the direction and control of the First Secretary of State who, despite his many abilities which we recognise, is temperamentally unsuited? [Laughter.] Will the Prime Minister quite seriously consider moving responsibility for the incomes policy to the Minister of Labour?

The Prime Minister: While my right hon. Friend is undoubtedly of Irish descent, I am fully satisfied that not only in terms of temperament, which many hon. and right hon. Members would have, I think, for doing this job, he has also got the "guts" to do it, which nobody opposite has had.

Oral Answers to Questions — COUNCIL HOUSES (SUBSIDIES)

Mr. Hamling: asked the Prime Minister what representations he has received urging the readjustment of subsidies

in respect of council houses; and what replies he has sent.

The Prime Minister: None, Sir. But any such representations would, of course, be studied by my right hon. Friends the Ministers concerned.

Mr. Hamling: Is my right hon. Friend aware that the Conservative Party seems to have changed its policy on council rents and, these days, is in favour of compulsion?

The Prime Minister: I have not had any representations from the Conservative Party on the subject raised by my hon. Friend's original Question, but, of course, if the Conservatives want to replace the Welfare State by the Means Test State, that is up to them.

Mr. Boyd-Carpenter: Is the right hon. Gentleman aware that the policy of the Minister of Housing and Local Government as outlined in his White Paper in this respect has been repudiated by the Labour majority on the Greater London Council?

The Prime Minister: There have been a number of representations made by a number of councils, including—[HON. MEMBERS: "Answer."] It has not been repudiated, but there has been criticism by a number of Labour councils, including, may I say, Liverpool, a bit nearer my constituency. The reason why they would like a change in policy is that they want us to spend a lot more of the taxpayers' money in subsidising the housing account. We have done as much as we can in the new policy. To go any further we believe would be improvident, and it would hardly be supported by right hon. Members opposite who spend so much of their time talking about cutting taxes.

Mr. Heath: Is the Prime Minister aware that the Minister of Housing and Local Government in his article in the People of 6th February said that rich people living in council houses ought to be charged £1,000 a year rent? Is he repudiating this means test by his right hon. Friend?

The Prime Minister: No, Sir; my right hon. Friend was referring to the rent rebate schemes in a lot of councils. We believe that this is a matter for the councils, but—[HON. MEMBERS: "Means


test."] The right hon. Gentleman can, of course, issue a statement at 10 o'clock at night on anything he forgets to say. What we reject is dictation from Whitehall such as the right hon. Gentleman is suggesting.

Mr. Heath: Is the Prime Minister, therefore, saying that he does not reject the means test?

The Prime Minister: What we are saying is that, within the housing accounts of each local authority, each local authority should have local freedom to decide these matters. We have always said that. What we object to is the right hon. Gentleman's suggestion that council house rents should be raised—[HON. MEMBERS: "Answer."] Will hon. Members listen? I am answering. What we reject is the right hon. Gentleman's proposal that council house rents should be raised all over the country by Whitehall fiat and then a means test be applied.

Oral Answers to Questions — POWER INDUSTRIES (ESSENTIAL SUPPLIES)

Mr. Hamling: asked the Prime Minister what changes he proposes to make in interdepartmental arrangements to ensure that future development plans in the power industries are not hampered by the failure of contractors to supply essential machinery and spare parts when they are needed.

The Prime Minister: The Government are concerned to do all they can to identify bottlenecks and speed production, but the primary responsibility for these matters rests with the contractors and subcontractors concerned.

Mr. Hamling: Could my right hon. Friend explain why nationalisation should be blamed for the failures of private contractors?

The Prime Minister: This is a question of who writes the articles and makes the speeches. Some people made up their minds long ago, even before nationalisation. In this particular case, if my hon. Friend is thinking, for example, about supplies of spares and the quality of spares for a gas works in the Midlands, my right hon. Friend has announced that an inquiry is to take place. We had better await the result of that inquiry.

Oral Answers to Questions — NUCLEAR TESTS

Mr. Alison: asked the Prime Minister if he will take a new initiative to secure the signing of a comprehensive treaty banning all nuclear tests, including those conducted underground.

The Prime Minister: The main obstacle to the conclusion of a comprehensive test ban treaty remains the impossibility, according to the best scientific advice available to us, of positively identifying underground nuclear tests by seismic means alone. The Russians claim that national means of detection are entirely adequate, and we have asked them to join in scientific talks to explore this claim. So far, they have refused.

Mr. Alison: Does the Prime Minister agree that the recent massive Soviet underground nuclear test, no less than other underground nuclear tests by other Powers recently, lends a new urgency to the problem? Does he appreciate that the conclusion of a comprehensive treaty would be a useful step in the direction of non-proliferation, and will he restore something of the energy of the last Government in pursuing this objective?

The Prime Minister: I agree about the urgency of this question of underground tests. The recent improvement internationally of means of detecting underground tests provides, I think, a more hopeful basis for getting this agreement. We agree that it is urgent. We agree that it is relevant to the question of non-proliferation, although not a substitute for a wider non-proliferation agreement. As to the sense of urgency shown by the last Government on this subject, they did, in the end, get a treaty.

Sir Knox Cunningham: Can the Prime Minister say whether there is any danger of contamination of the atmosphere from underground tests? Is that something that he can assure the House about?

The Prime Minister: I would like notice of that supplementary question but in general I think that the position is that there is no danger in the vast majority of underground tests. It was because of this that, three years ago, underground tests were separated from the rest. However, there have been one or two tests recently giving rise to some


anxiety because of a certain amount of seepage following fall-out. I would not like to give 100 per cent. clearance. Perhaps the hon. and learned Gentleman will put down that Question.

Mr. Will Griffiths: Does my right hon. Friend expect to discuss this matter during his visit to Moscow?

The Prime Minister: Yes, Sir. I very much hope that we shall do so, together with the wider question of non-proliferation.

Mr. Hogg: Will the Prime Minister confirm that, should an underground test yield a substantial leakage into the atmosphere, it would be in breach of the existing partial Test-Ban Treaty?

The Prime Minister: Yes, Sir, I agree with the right hon. and learned Gentleman. But the hon. and learned Member for Antrim, South (Sir Knox Cunningham) asked whether underground tests could have the effect of contaminating the atmosphere. If a test did have such an effect, that would be a breach of the treaty. I would like to go further into the question, however, of whether this has been happening.

Oral Answers to Questions — BILL PRESENTED

SLAUGHTER OF POULTRY

Bill to provide for the humane slaughter, for certain commercial purposes, of poultry; presented by Mr. David Ensor; supported by Mr. Urwin, Mr. Bernard Conlan, Mr. Gordon A. T. Bagier, Sir Leslie Thomas, and Miss Quennell; read the First time; to be read a Second time upon Friday 18th March and to be printed [Bill 72.]

DEFENCE (UNITED STATES AIRCRAFT)

Sir Ian Orr-Ewing: Mr. Speaker. I beg to ask leave to move the Adjournment of the House under Standing Order No. 9 for the purpose of discussing a definite matter of urgent public importance, namely,
the intended expenditure by Her Majesty's Government of over £150 million on further United States aircraft which, within the context of a fixed defence budget, may cause a reduction in the size of the British Army, cancellation of the next generation of aircraft carriers,

the possible abandonment of the Aden base and, by rejecting the Mirage-Spey aircraft, will greatly harm co-operation between the British and the French aircraft industries.
It has first to be proved that this is "a definite matter". From what we heard at Question Time from the Prime Minister in reply to my right hon. Friend the Leader of the Opposition, it appears that, as a result of three Cabinet meetings, a definite decision has been taken. If no definite decision has been taken we cannot understand why the Secretary of State for Defence is to go to Washington. To support my argument, I would point out that there appear to have been inspired leaks to every single national newspaper today. It therefore appears to be a definite matter.
The "urgency" is in the fact that the Secretary of State for Defence leaves for Washington tomorrow and there he will undertake what appears to be an irrevocable decision in favour of the purchase of these aircraft. Too often in the past we have learnt of such things either through "leaks" to our own Press, or as statements issued by Washington after the event has taken place. Surely, therefore, this House should debate such matters of moment before a decision is finally taken rather than after it has been irrevocably taken.
The "public importance" is in the fact that the expenditure of £150 million more upon these aircraft must have very considerable repercussions on all our defence Services. I have just enumerated some of them. I hope that, for these reasons, you will agree to a Motion for the Adjournment of the House on this urgent matter of public importance, Mr. Speaker.

Mr. Speaker: The hon. Member for Hendon, North (Sir Ian Orr-Ewing) asks leave to move the Adjournment of the House for the purpose of discussing a definite matter of urgent public importance, namely,
the intended expenditure by Her Majesty's Government of over £150 million on further United States aircraft which, within the context of a fixed defence budget, may cause a reduction in the size of the British Army, cancellation of the next generation of aircraft carriers, the possible abandonment of the Aden base and, by rejecting the Mirage-Spey aircraft, will greatly harm co-operation between the British and the French aircraft industries.
May I, first, express my thanks to the hon. Gentleman for his courtesy in


letting me know that this might be in his mind this afternoon. Perhaps I may also, in parentheses, express the Chair's very sincere appreciation of the many courtesies which right hon. and hon. Members are showing me.
My predecessors have consistently held that it is not within the power of the Chair to grant leave to move the Adjournment before the necessary facts become available, and I am sure that the House will appreciate that the facts are not as yet available.
I must say to the hon. Gentleman, however, that even if the facts regarding the final decision were available, I doubt whether the application would come within the scope of the Standing Order. Where a matter has been continuing for some time, it has been held that the necessary element of urgency is not present when a decision is finally announced.
An application to move the Adjournment of the House on somewhat similar grounds was made on 19th January, 1965, over a year ago. In these circumstances, I think that I would have been obliged to rule that a decision formed part of a continuing matter.
I regret that I am not able to accede to the hon. Gentleman's request for leave to move the Adjournment of the House.

Mr. Woodburn: On a point of order, Mr. Speaker. While admiring the ingenuity of an hon. Member in managing to deliver a speech by imagining certain facts, how far is it in order for hon. Members to make conjectures and, on the basis of that, deliver a speech and anticipate debates in the House?

Mr. Speaker: If the hon. Member for Hendon, North (Sir Ian Orr-Ewing) had been out of order in anything he said, the Chair would have called him to Order.

Captain Litchfield: Further to that point of order, Mr. Speaker. One of the grounds of the urgency of the matter is that the facts are not before us. We have had only statements in the public Press, which appeared to be inspired "leaks" after a Cabinet meeting, which threaten the future of the Royal Navy. It is because these statements can neither be confirmed nor denied for at least another week that this may do very grave harm to the

morale of the British Navy. I respectfully submit that there is great urgency to clear up this matter one way or the other.

Mr. Speaker: I hope that the House will accept it when the Chair makes a Ruling under this very difficult Standing Order No. 9. I must say, however, that it was worth allowing the hon. and gallant Member for Chelsea (Captain Litchfield to put his point of order for the very ingenious way in which he approached the problem of urgency and definiteness.

Dame Irene Ward: Further to that point of order, Mr. Speaker. Can you say whether it is ever to be possible to alter a precedent in the national interest? Must life always go on the same?

Mr. Speaker: In reply to the hon. Lady's first question, it is invariably the rule of the Chair never to commit itself on the hypothetical future in the House.
The answer to the second question is that, although Mr. Speaker in earlier life had some connection with philosophy, this question is beyond his capacity to consider whether life always goes on the same is a question that must be addressed to someone in a university.

Mr. Heath: Further to that point of order. Of course, we accept your Ruling on the grounds of precedent, Mr. Speaker. However, would it be possible to review the consequences of this precedent, or for the Leader of the House to consider it?
The House finds itself in a difficult situation in which, if information is not provided by the Government after a matter has been under discussion for some time, it is ruled as a continuing matter and, therefore, not urgent, although the Government can take executive action which is then beyond recall without the House having had an opportunity to debate it.
Would not this appear to be the basis for reconsideration either by yourself as a precedent, or by the Leader of the House as a convenience of the House?

Mr. Speaker: The Chair can answer only for the Chair. If the House cares to consider what the right hon. Gentleman has said it is not for the Chair to upset 100 years of precedent, but it is always within the capacity of the House to do so


if it so decides. There is a Select Committee on Procedure which at any time can examine and, one would hope, would examine from time to time any of the rules and customs of the House which it thinks weigh unfairly on any part of the House or on its efficiency.

Mr. Paget: On a point of order. On the question of the facts being ascertained, an hon. Member has to take responsibility for the facts he asserts. If he asserts the facts and asserts that he knows them, he is under no obligation to get confirmation of them from the Government before seeking to move his Motion. In this case, as I understand it, the hon. Gentleman the Member for Hendon, North (Sir Ian Orr-Ewing) asserted precise facts and asserted his knowledge of them. It is true that at Question Time the Government refused to confirm them, but, if the hon. Gentleman takes responsibility, in my submission those are the facts which are before the House.

Mr. Speaker: I understand the argument of the hon. and learned Member for Northampton (Mr. Paget). We are moving almost into the realms of deep motivation. The hon. Member for Hendon, North accepted the responsibility himself for the grounds on which he sought to move the Adjournment of the House under Standing Order No. 9 and had a right to do so. The fact that he used other information as part of the material on which he formed his own judgment is a matter of psychology and not of politics.

Sir A. V. Harvey: On a point of order. While respecting your Ruling completely, Mr. Speaker, some of us who follow these matters closely are consistently finding from reports by prominent journalists, such as Mr. Chapman Pincher, that they are getting information long before the House does. May I ask you how Members of Parliament, who are elected by the people, can be informed before prominent journalists?

Mr. Speaker: That is not for the Chair. That is a matter for the House which one side or the other must take up in the ordinary way as political argument and discussion on the Floor of the House.

Sir G. Nicholson: On a point of order. I should value your advice on this matter,

Mr. Speaker. The House is under the impression that something irrevocable is to be done in Washington during the next day or two. May I ask you how any hon. or right hon. Gentleman can raise the matter in the House in the very short time available?

Mr. Speaker: I know the Parliamentary skill of the hon. Gentleman. The last thing, however, that the Chair would wish to do is to act as political adviser to one side of the House or the other. That is a matter on which the hon. Gentleman must seek the advice of the leaders of his own side.

Mr. Dan Jones: On a point of order. Does not the fact that repeated points of order have been put to the Chair constitute in itself an inability on the part of Her Majesty's Opposition to accept the Ruling of the Chair?

Mr. Speaker: I hope that what my predecessor called bogus points of order will never be raised. I have taken the points of order as they have come. They have seemed to me to be quite serious.

Several Hon. Members: Several Hon. Members rose—

Mr. Speaker: Order. I would only say to young hon. Members that it is dangerous to venture into the realm of points of order.

Mr. Box: On a point of order. Would it now be in order to allow time for the Prime Minister to give us the facts of this situation?

Mr. Speaker: No. That was an example of a point of order which a young and inexperienced hon. Member might make.

Rear-Admiral Morgan Giles: I would be very grateful, Mr. Speaker, if you would enlighten the House on a point which you made in your original Ruling on my hon. Friend's application, when you said that even if the facts were available you doubted whether the Motion would be accepted. The facts appear to be at present—

Mr. Speaker: Order. This, again, is a classic example of a point which is not really a point of order. The Chair cannot go back to a Ruling which it has made and explain parts of it to hon. Members who did not follow it at the time. We must now proceed.

INVESTMENT INCENTIVES AND INDUSTRIAL REORGANISATION CORPORATION

3.46 p.m.

The First Secretary of State and Secretary of State for Economic Affairs (Mr. George Brown): I beg to move,
That this House approves the proposals in Command Papers Nos. 2874 and 2889.
May I say, first, to the hon. Lady the Member for Wallsend, who is so hurriedly leaving us, that in moving this Motion I hope to show that at least life is not going on the same in the economic field.

Dame Irene Ward: On a point of order. I hesitate to interrupt the right hon. Gentleman, but I happen to be the Member for Tynemouth.

Mr. Brown: I gather that the hon. Lady is still leaving us.
The Government are fundamentally concerned to achieve social justice in our society. [Laughter.]

Mr. Speaker: Order. I hope that the moment never comes when the Chair has to ration the applause and laughter of the House, but I think that we might now get on with the serious debate.

Mr. Brown: I was saying that the Government are fundamentally concerned to achieve social justice in our society, and recognise that the pre-condition for the necessary changes in our society today is the advance of British industry. That is why we have an overwhelming identity of interest with industry which is rationalised, modernised and, therefore, more efficient and organised for faster growth.
The changes necessary to achieve this require competition and co-operation, competition to produce change and cooperation among Government, management and the unions so that all those whose lives and livelihoods will be affected by change have confidence that in this industrial revolution people matter and that provision has been made for their education, retraining, redeployment and retirement. These considerations, in two words, efficiency plus humanity, are fundamental to our approach to the economic problems of the country and

our policies are geared to their attainment.
When they are not simply nagging, as nearly always they are, right hon. Gentlemen opposite talk about the importance of incentives. There is certainly no more important incentive for the growth of our country than the incentive to industry to invest in modern productive plant. The system of incentives which we inherited was based on the indiscriminate use of investment allowances.
As my right hon. Friend the Chancellor explained in his Budget speech last April, we cannot feel that the system gave an effective stimulus to the kind of investment that we need to fulfil the objectives of the National Plan. So we put in hand a thorough-going review, with lots of consultation with interested parties, from whom we received a great deal of help. In that review we covered a wide range of alternative methods to the system which had not been working as well as was needed. The conclusions we reached after this wide-ranging consultation are set out in the White Paper which we are debating today.
We have introduced three fundamental changes. First, the form of incentive differs from the past. It is now to be made by way of cash grants instead of investment allowances. Secondly, the new scheme will concentrate Government assistance on those sectors of the economy which are the most important for the balance of payments. Thirdly, it involves a radical change in our approach to the problem of regions with underused resources. The old system of allowances was too uncertain and too slow, and for many firms it was too difficult to calculate the effects. Cash grants will be more certain and much more readily intelligible to the works manager and the engineer and not just to the accountant and tax experts.
When the scheme is in full operation the effect will be felt more quickly than the old allowances. Tax allowances depend on the level of profit and the rate of tax in future years. We expect firms investing in new plant to make profits. We do not want to encourage unprofitable investment. But there can be a great deal of uncertainty about just when the profit will be big enough to absorb the tax allowances. This means, as I think


all businessmen will recognise, that investment decisions are much more difficult. This acts as a brake on innovation. This is especially true for new firms or firms setting up in a new area. It is also true that even medium to fairly large-sized firms often lack the sophisticated accounting techniques which are necessary to take full account of investment allowances when making their investment decisions. These are the firms which can raise their efficiency and compete more effectively in world markets.
The new system involves a deliberate discrimination in favour of certain sectors of industry. This does not mean that the Government wish to discourage investment leading to greater efficiency in those sectors which will not qualify for the grants. All decisions, whether in politics or business are made on an assessment of priorities. The House would agree that the overriding need is to increase efficiency in manufacturing industry because that is the area which has to face direct competition in international trade, and which exports about 25 per cent. of its output.
It is not simply a matter of exports. Our manufacturers have also to meet much more effectively than they have been doing in some cases, foreign competition in the home market. In the study of imported manufactures made by the National Economic Development Council, it was shown very clearly how the shortages of capacity in manufacturing industry had led to these big increases in imports. We all know that expansion can very easily involve a great and difficult increase in imports unless one can meet this competition much more effectively.
The spur to investment, which we believe will be given by the new system, will help to overcome this situation. It will also provide a powerful instrument for implementing our regional policies. From the beginning of our period in office we have made it clear that we are determined to achieve a more balanced distribution of economic growth and prosperity throughout the whole of the United Kingdom. The regional imbalance which we inherited, despite the efforts made by the right hon. Gentleman the Leader of the Opposition and his right hon. and learned Friend the Member for St. Marylebone (Mr. Hogg)—which I do not minimise—is one of the most inefficient

and unjust results of the operation of those free market forces to which right hon. Gentlemen on the benches opposite often seem to be so attached.
It is inefficient because it means that resources are left idle in some parts of the country, while in others the pressures are so acute that costs become difficult to control. It is unjust, because it deprives people in many of our older industrial regions of the opportunity to live as rewarding a life as their fellow countrymen in more favoured areas.

Colonel Sir Harwood Harrison: The right hon. Gentleman was rather critical of manufacturers. Would he not also agree that we need greater efficiency in the distributive trades thereby releasing more men for our factories?

Mr. Brown: If the hon. Gentleman will wait, I am coming to that point. It will be easier if I am allowed to set the stall up.
We have already taken a series of interim measures to deal with this regional problem within the scope of the limited powers which were available to us. Those powers were designed to cope with pockets of high unemployment. Our new proposals will enable us to tackle positively the underlying problem of structural imbalance between the slow and fast growing regions. Narrowly defined development regions which were based on unemployment alone and took no account of wider economic and social considerations will go.
In their place we are designating five broad development areas covering almost all of Scotland and Wales, the whole of the northern region and most of Cornwall and North Devon and a wider area based on Merseyside. In these areas manufacturing firms will qualify for investment grants at double the national rate. The procedure for obtaining grants will be simpler as they will not depend on the provision of extra employment. There is now a clear, certain and powerful stimulus to the modernisation and growth of industry throughout the development areas.
The discriminatory aspects of this scheme, which I have not hidden, have been criticised, and are criticised in the Amendment which hon. and right hon. Gentlemen intend to move. I understand the basis of the criticism. Any scheme


which discriminates in favour of certain sectors is bound to be criticised by those which are left out. I would suggest that it was a complete lack of discrimination in the old system which was one of its outstanding weaknesses.
I accept that the construction, transport and other service industries provide the infrastructure for manufacturing industry and thus contribute indirectly to the balance of payments. And a part of the output of the service industries also contributes directly, in the short run, to invisible earnings. But it is on manufacturers that we rely directly and immediately for our balance of trade. It is they who have to compete internationally, both in export markets and, with imports, in the home market.
As I have said, British manufacturers export a quarter of their total production. May I say to those who sometimes fall into the trap of denigrating the effort because they want to bring out our problems that that level of exports is the third highest in the world. If they succeed, we all succeed. If they fail, we all fail. They are the pace-setters. We cannot have a strong service industry, a strong banking system, above all, a strong currency, on a weak manufacturing base. But if we have a strong manufacturing base—maintaining our share of world manufacturing investment—and a strong balance of trade, then there will be a strong and steady demand for the service industries and, despite the lower investment incentive, they will, in fact, be better off than they would be with stagnant or declining demand.
Let us be realistic. We must either have higher taxes to pay for the wider spread of investment grants, or we must spread them much thinner and run the risk that they will not be enough where they matter most. The Government have decided to concentrate the grants where they will make the most immediate and decisive impact in maintaining and improving Britain's share of world trade. I am sure that this is right.
I now turn to the second half of the Motion, which asks the House to approve the White Paper on the Industrial Reorganisation Corporation. The Motion links these two major new initiatives by the Government because they are complementary parts of our policy to modernise

Britain and eradicate the underlying weaknesses in our economy.
It is just as important to ensure that the structure and organisation of industry can make the most efficient use of our resources as it is to stimulate a higher level of investment in key sectors of our economy. Few now doubt that changes in the structure and organisation of British industry are urgently needed. I was encouraged to see that Mr. John Davies, the Director-General of the Confederation of British Industry, speaking at the Electrical Contractors Trade Association dinner about a week ago, put the point very forcefully. Hon. Members opposite may be particularly interested to be reminded of what he said:
To a very large extent we have an industrial structure geared to a situation which no longer exists and ill-attuned to the industrial world in which we live. We must move towards company structures capable of competing in research and development, in scale of production, in market coverage and in financial strength. Not, as heretofore, on a local plane—to a large degree not even on a national plane—but on an international one.
This is what we are getting at. Too many firms in this country are content to go on working at a scale and with methods which simply do not measure up to the needs of international competition today.
In the years ahead we shall be facing growing competition from highly integrated international groups, based on the United States and the Common Market. In many sectors of industry the typical British company cannot command the resources or achieve the economies of scale which are essential if competition of that kind is to be met successfully.
Even at the present time far too much of our export effort depends on relatively few firms which are really equipped to provide the range of marketing expertise and service which international trade demands. In 1963, over a quarter of our total sales abroad were made by just 35 firms.
The question we have to face is how we can bring about a faster pace of change and reorganisation in British industry. Here again, I find myself in agreement with the Director-General of the C.B.I. In the speech from which I have already quoted he went on to say:
Concentration will not be brought about by wishing it were so, nor by exhortations or


curses; nor will it be brought about by compulsion".
To which I would add: it is practical help that is required.
Of course, I accept that in some sectors of industry enterprising industrialists have brought about radical reorganisation in recent years, and that financial institutions—merchant banks and others—have given valuable assistance in carrying through the necessary mergers and regroupings. But in too many sectors of industry the impetus to change and rationalise is missing. And when initiative is lacking on the industrial side there is little that the financial institutions can do to bring about reorganisation. By and large, merchant banks, issuing houses, and the rest act only when they receive instructions to do so from clients. Those who believe that market forces alone will bring about the necessary structural changes in industry at the pace required are simply deluding themselves.
This is why we have decided to set up the Industrial Reorganisation Corporation, whose main function will be to increase the pace of rationalisation. Under the leadership of Sir Frank Kearton—who has as good a knowledge of the problems as anyone in industry today—it will act as a "ginger group", constantly seeking out opportunities for mergers and regroupings which will benefit the national economy. It will operate on strictly economic and industrial criteria, and not on those of the purely financial takeover bidder, or of the holding company whose aim is to diversify its interests rather than concentrate and rationalise.
The Corporation's job will be to take the initiative, to get reorganisation moving and to try to remove any obstacles in its path. I will not pretend that it will be an easy job—resistance to change is deep-rooted and will not easily be overcome. But given the co-operation of progressive people in industry and the City—this we already have—I am confident that the Corporation will succeed.
Of course, some members of the party opposite, including the right hon. Member for Altrincham and Sale (Mr. Barber), have greeted the Corporation with the usual denunciation that they apply willy-nilly to everything we do. They have an obsession that any step which the Government take to improve

the working of the mixed economy is a subtly-disguised move towards further nationalisation. And then they have the effrontery to accuse us of being doctrinaire.
Let me make it quite clear once again—this time, I would hope, once and for all—that the Industrial Reorganisation Corporation will have no compulsory powers whatsoever. But its job is to bring the changes about. [HON. MEMBERS: "How?"] In the sort of ways that the Director-General of the C.B.I. was talking about. But let me go on and explain it further, if I may.
The White Paper makes it clear that the Corporation will seek the fullest cooperation from existing institutions. Having brought the parties together, it will often be able to leave the carrying through of the regrouping entirely to the companies concerned and their advisers.

Mr. Anthony Barber: Will the right hon. Gentleman help on one point? He has three times referred to the Director-General of the C.B.I. in connection with this new institution. Will he tell the House whether the Director-General is in favour of it or not?

Mr. Brown: I have not the slightest idea. All I know is that he has been consulted throughout and that what he said in that speech is extremely relevant to what we are doing. [An HON. MEMBER: "Is it fair to drag him in?"] What he said is relevant to what we are trying to carry out. If he does not think that it is the right way, it is for him to say, and not for me. It is addressed to the problems and remedies that he raised. It is a perfectly fair thing to say.
May I repeat what I have said, because I want the right hon. Gentleman to get it very clear? The White Paper makes it clear that the Corporation will seek the fullest co-operation from existing institutions. Having brought the parties together, it will often be able to leave the carrying-through of the regrouping entirely to the companies concerned and their advisers. But in many cases the Corporation will need to be able to do more. It will need to back its judgment of the prospects of the new groupings which it is initiating by providing them with financial backing from its own resources. This is likely to be the case,


particularly when the benefits of rationalisation may only be fully realised in the long-term. The Corporation will be able to take a longer view than the market is in the habit of doing. It will be able to provide finance, either in the form of a loan or by taking up equity in the new groupings.
Hon. Members opposite have made a considerable fuss about this power to take up equity. They evidently think that it is perfectly proper for the Government or a public corporation to make finance available to private industry, which, of course, comes from the taxpayer as long as the taxpayer does not get a share in the profits which arise from that investment.
Right hon. and hon. Gentlemen opposite have a "heads I win, tails you lose" mentality. They overlook that it is common practice in industry for any institution which is putting its money at risk in a venture to be given an opportunity to take a stake in the ownership, so that it gets a fair reward when success is achieved. In this respect, at least, the analogy between the Corporation and a merchant bank is an exact one. I am not prepared to accept that the Corporation should be able to make finance available, but not to take reasonable steps to protect its investment.
But I must make it clear, especially for the benefit of the right hon. Gentleman, that the Corporation is not being set up to provide cheap money for those who could quite well raise it on the market. It will certainly not be willing to featherbed the inefficient. Where new groupings can raise money on the market to finance amalgamations or expansions, they will still be expected to do so. Where the market is unable or unwilling to provide all the capital required, the Corporation will normally expect to receive a commercial rate of return on the money it makes available.
In all its activities the Corporation will act as a responsible commercial body. It will not support any venture unless it is satisfied that it will lead to a better use of resources and has good prospects of achieving viability. Taking its operations as a whole, the Corporation will aim to make a surplus big enough to service its

loans, provide for reserves, and pay a dividend on its Exchequer dividend capital.
The Corporation will be able to draw up to £150 million from the Exchequer and most of this will take the form of fixed-interest loans on which the interest rate will certainly not be less than that which the Government pay on their borrowing from the market. But the Corporation will also be able to draw part of its funds in the form of Exchequer dividend capital. This will be the equivalent of the Corporation's equity capital and the return which the Government receives, as sole shareholder, will depend on the profitability of the Corporation's activities.
Clearly, it will be several years before the Corporation can be expected to earn big profits. But when the benefits of rationalisation schemes have been fully secured, the Corporation will be able to sell its stake in new groupings. It will normally wish to reinvest its capital and thereby help on further rationalisation. Some part of its profits will of course be put to reserve, but, in consultation with the Government, the remainder will be used to pay the Exchequer—and thereby the taxpayer—a dividend on the equity capital.
I do not want, and I do not intend, to put the Corporation under an obligation to sell its stake in successful ventures at the earliest possible, or indeed necessarily, at any other moment. In the management of its investments, as in all other aspects of its business, the Corporation will not be subject to day-to-day control by the Government. If Sir Frank Kearton and his colleagues on the Board feel that there are good commercial reasons for continuing to hold equities in a new grouping, they will be free to do so. But the Corporation would not be fulfilling the functions for which it is being set up if it ceased to be a dynamic ginger group, and we have no intention that it should act as a general holding company or as an investment trust.
I have dealt at some length with the way in which the Corporation will carry out its task of stimulating rationalisation and reorganisation. But the White Paper says that the Corporation
may also need to provide capital for new projects or expansions of special importance to the economy".


I will briefly explain what the Government have in mind here, if only to set at rest the minds of hon. Members opposite who have tried to use these words to prove that the Corporation is part of a secret plot to destroy the private sector of our economy. In fact, they know perfectly well that from time to time projects crop up which should be developed in the national interest, but which, for one reason or another, the market is not prepared to finance.
Some, like the Hovercraft, involve the exploitation of a new invention, and they can be, and have been, backed by the National Research Development Corporation. But others, for example the pulp and paper mill at Fort William, are outside the proper scope of the N.R.D.C. In the past it has nearly always been necessary for separate legislation to be passed when a case of this kind has arisen. That is a time-consuming process and often time is of great importance with projects of this kind. In future, as a result of the establishment of the Corporation, it will be possible to finance projects of this kind—economically and financially sound projects—as well as socially desirable projects—through the Corporation.

Mr. Geoffrey Hirst: Mr. Geoffrey Hirst (Shipley) rose—

Mr. Brown: Perhaps the hon. Gentleman will allow me to complete what I am saying, and then I will give way.
Let me make it quite clear. The Government accept—and I should like the right hon. Gentleman to hear this, because I think that it will help him—that the mixed economy will be the normal pattern for as far ahead as we should now be planning. We also believe that the Government must do everything in their power to make the mixed economy work in the interests of the community as a whole.
It is equally clear that the boundary between the public and private sectors of a mixed economy is not a static one. It will change from time to time, but the Corporation has nothing basically to do with the decisions which we may, and undoubtedly will, take from time to time about this boundary. I give way to the hon. Member now.

Mr. Hirst: In relation to these additional duties, can the right hon. Gentleman

make clear the exact difference between the functions of this body and those Government-inspired institutions in the City of which he knows, which exist to carry out that function?

Mr. Brown: They get capital from different sources. Either the hon. Gentleman has not followed what I have been saying, which, I imagine, is my fault and not his, or he does not know how those institutions work.

Mr. Hirst: I do.

Mr. Brown: They are lenders of finance. They are not the initiators of reorganisation and reconstruction schemes. The Corporation has a totally different fundamental reason for existing, and is not in any way in competition with them. Indeed, some of the work of the Corporation could be financed from the resources of those institutions.

Mr. Stanley R. McMaster: Mr. Stanley R. McMaster (Belfast, East) rose—

Mr. Stanley Orme: Will my right hon. Friend give way for a moment?

Mr. Brown: I give way to my hon. Friend.

Mr. McMaster: Can the right hon. Gentleman say—

Mr. Speaker: Order. The right hon. Gentleman has the right to decide to whom he gives way.

Mr. Orme: When my right hon. Friend spoke about the boundary between the public and private sectors he said that this would remain the same for a number of years. Surely he does not mean that this is not to change?

Mr. Brown: That shows how difficult it sometimes is in the House. I wondered how hon. Gentlemen opposite had lived for half an hour without getting the giggles. [Laughter.] Now they have them. I said the opposite of what my hon. Friend thought I said. I said that we accept the mixed economy, but that the boundary between public and private enterprise will change. What I went on to say—[Interruption.]

Mr. Speaker: Order.

Mr. Brown: If the right hon. Gentleman had been listening to what I said


earlier, he would have heard me deal with that point. I am dealing with another one now. We shall listen with interest to him later in the day, and I am sure that his speech will be all the better if he contains himself now.
What I want to make clear—and I shall repeat the words which I used—is that the Corporation will have nothing basically to do with the decisions which may be made in the House from time to time about where the boundary between public and private enterprise should be.

Mr. McMaster: Will the Corporation's activities extend to Northern Ireland? What part, if any, of the £150 million is to be spent on buying shares in the aircraft industry?

Mr. Brown: On the second question, I think that I had better get the organisation constructed and set up before we decide how it is to operate in that kind of detail. The answer to the first question is that I am sure it will, but I should like to check that.
The purpose of these proposals is to put British industry in a stronger position. Does the hon. Member for Henley (Mr. Hay) wish to intervene?

Mr. John Hay: I am astonished that the right hon. Gentleman does not know whether this will apply to Northern Ireland.

Mr. Brown: If the hon. Gentleman was not in such a hurry, we would understand that I was paying Northern Ireland the courtesy of finding out whether we have got this agreed with them. The answer is "Yes", but, unlike the party opposite, which has 12 tame hacks from Northern Ireland—[Interruption.]

Mr. Quintin Hogg: On a point of order. I distinctly heard the right hon. Gentleman refer to 12 of my hon. Friends as tame hacks. Is it in order so to refer to hon. Members of this House?

Mr. Speaker: Order. It was most difficult for me to hear the point of order, which I expected would come the moment I heard what was said. I think that the remark was a metaphor within the rules of the House.

Mr. Brown: Further to that point of order. If it will help, I will withdraw the word "tame", Sir.

Mr. Hogg: On a point of order. If the word "tame" is withdrawn, is it not worse? May I ask you to rule that hon. Members on both sides of the House should be treated with reasonable courtesy? [Interruption.]

Mr. Speaker: Order. I hope that right hon. and hon. Members on both sides of the House will treat each other with reasonable courtesy. The Chair, like every right hon. and hon. Member, welcomes the cut and thrust of debate, but has no liking for mere knockabout in debate.

Mr. Brown: Mr. Brown rose—

Hon. Members: Withdraw.

Mr. Brown: I was saying that the only reason—

Mr. McMaster: On a point of order. Mr. Speaker, may I, as one of the Ulster Unionist Members who has opposed both Governments when he thought proper, ask you to reconsider your Ruling? I feel greatly offended at being referred to as a hack, and I should like the right hon. Gentleman to withdraw that remark.

Mr. Speaker: Hon. Members in this Chamber hear many things said by other hon. Members which must hurt them and give offence, but as long as the expression used is not out of order the hon. Member must find a political opportunity of expressing what I know are his feelings about this.

Mr. Brown: I was trying to say that I hesitated for a moment because I did not want to announce in the House what I knew to be true unless I had found out whether it was convenient for the Northern Ireland Government, and I used what I thought were conventional words to make that clear to the House. I was paying that courtesy to the Northern Ireland Government.
The purpose of the proposals—

Mr. George Forrest: On a point of order. Is the right hon. Gentleman referring to the Northern Ireland Government as a party of hacks?

Mr. Speaker: What is the point of order?

Mr. Forrest: I should like to know why the right hon. Gentleman continually refers to the 12 Members from Northern Ireland as hacks.

Mr. Speaker: Order. The hon. Member must resume his seat. He has asked the Chair why the right hon. Gentleman used the expression that he did. It is not for the Chair to give reasons for this. This is something which the hon. Member must take up in the usual political way with the right hon. Gentleman who said it.

Mr. Brown: I was bringing what I had to say to a conclusion by telling the House that the purpose of the proposals which we are debating today is to put industry in a stronger position to face the challenge of international competition in a rapidly changing world. These proposals are based, not on dogma, but on a practical understanding of the realities of our economic position and the state of industry. With these measures we aim to bring the good up to the level of the best, which I believe forward-looking people at all levels in industry expect from a modern Government.
I am confident that with their cooperation the country will secure the benefits in terms of improved industrial performance for which we and they are working, and I invite the House to support us in this important effort.

Sir John Rodgers: I should like clarification on one point. When he was talking about the new Corporation and its relationship to the City finance organisations set up by previous Governments the right hon. Gentleman referred to the hundreds of millions of pounds available to spend. Will this new Corporation have available for this purpose not only the £150 million but funds which it can draw from the other corporations?

Mr. Brown: The hon. Gentleman has it exactly wrong. What I said was that many groupings which the new Corporation may be able to influence and bring about might be financed wholly from private sources. Alternatively, it would be possible for them to be financed from those institutions—the F.I.C. and the others—which, in turn, raise their funds from private sources, with Government

backing. Thirdly, they might be financed wholly from the new Corporation's funds.
I was trying to make the point that when the Corporation brings about measures of reconstruction, rationalisation and reorganisation it does not follow that the subsequent financing need necessarily be done from the Corporation's funds.

4.31 p.m.

Mr. Anthony Barber: I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:
while welcoming practical encouragement of profitable investment, declines to approve the proposals in Command Paper No. 2874 on Investment Incentives which discriminate against the construction, transport and service industries, which will lessen the incentive for industry to move to development districts, and which will be operated on a discriminatory basis; and declines to accept Command Paper No. 2889 on the Industrial Reorganisation Corporation".
The Government have chosen to debate together the proposals contained in these two White Papers. To the extent that they are both concerned with the Government's industrial policy, that is not unreasonable, but if we are to consider the policy as a whole we should bring in a variety of other matters. In passing, the right hon. Gentleman referred to education, retraining and retirement. He could also have referred to the penalty on the distribution of profits imposed by the last Finance Act, with its inhibiting effect on the free flow of capital to the new and thrusting industries.
The right hon. Gentleman could also have referred to the overall increase in company taxation which has diminished the funds which would otherwise have been available for reinvestment in industry, and also to the toughest credit squeeze since the end of the war, which has resulted in the last published Index of Industrial Production being actually lower that it was in January, 1965.
All these factors, and those to which the right hon. Gentleman referred, are relevant to the two White Papers, but, since I understand that we are to have a general debate on economic policy in the near future, I will do my best, as the right hon. Gentleman did, to confine my remarks to the proposals contained in the two White Papers. The most convenient course is to consider


them separately, again as he did, and I take them in the same order.
I start with the White Paper on Investment Incentives. It may be for the convenience of the House to say that on this White Paper I want to make my remarks under five heads: first, the uncertainty which has clouded the whole question of investment incentives since the last General Election; secondly, the administrative consequences of the new proposals; thirdly, the principles involved; fourthly, the actual practical consequence for industry, in terms of hard cash—to which the right hon. Gentleman never referred—and, finally, the regional implications.
First, as to the uncertainty engendered by the joint effort of the First Secretary and the Chancellor of the Exchequer, I would remind the House of the sequence of events. Within weeks of taking office the Chancellor announced that he proposed to introduce a Corporation Tax. At that stage neither he nor the Inland Revenue had worked out the practical consequences of their proposals in terms of industrial investment. Industries asked the Chancellor what effect the Corporation Tax would have on investment allowances, and were told to wait another four months until the Budget, in April.
When the Budget came, we learnt the worst. In the face of all the pre-election talk about added incentives for industrial investment, I am sure that the right hon. Gentleman will agree—and if he does not I hope that he will deny it now—that the only practical consequence of the type of Corporation Tax which he selected was to cut the value of the investment allowances by one-third—

The Chancellor of the Exchequer (Mr. James Callaghan): The Chancellor of the Exchequer (Mr. James Callaghan) indicated dissent.

Mr. Barber: If the right hon. Gentleman denies that, will he tell us what was the practical effect, in terms of hard cash? I will give way willingly. The answer is that it has had an effect, and I will tell him what it meant. It meant a cut in the value of investment allowances of £100 million. If the right hon. Gentleman disagrees, why does not he get up and say what was the financial effect?

Mr. Callaghan: I will tell the right hon. Gentleman why I do not get up. It is because we went over this ground time after time on the Finance Bill, for many weary days and nights. He never accepted the arguments that we put forward, and I am sure that he will not accept them this afternoon.

Mr. Barber: If the right hon. Gentleman would say what the financial consequence of these proposals was I would believe him when he says he disagrees with the figure that I have given.
Not content with reducing the incentive to industrial investment, he went on to say that during the forthcoming year he would look into the whole question again and consult industry. Some consultation he has had with industry! The Confederation of British Industry set in motion the most extensive and exhaustive survey of investment incentives ever carried out in this country. Those who replied to the questionnaire sent out by the C.B.I. account for 50 per cent. of the gross fixed investment in our manufacturing industry, and the order of preference for investment incentives was: first, free depreciation; secondly, the existing system of capital allowances; and, thirdly, a system of cash grants. Does he quarrel with that?

The President of the Board of Trade (Mr. Douglas Jay): If the right hon. Gentleman is quoting from this document he should point out that the questionnaire proposed a cash grant of 15 per cent., and we are now proposing 20 per cent.

Mr. Barber: That is true, but I am sure that the right hon. Gentleman will not deny that as a result of the answers to the questionnaire the Federation came to the conclusion that industry preferred, first, free depreciation—which for reasons which the Chancellor has given could not be accepted by the Government, owing to the cost involved—secondly, the existing system of capital allowances, and only thirdly a system of cash grants. In other words, the right hon. Gentleman has ignored the Federation's advice and has chosen the system which was bottom of the list.
Then the First Secretary has the arrogance to say, on the B.B.C.:
This new method is favoured by the leading and the most forward-looking people in industry. This I actually know.


It is significant that he was speaking on the Light Programme at the time. All I can say is that it is little wonder that The Times commented, a few days later, that
A new wave of disillusion with the Government has spread through British industry.
Margot Naylor, in the Observer, summed up the right hon. Gentleman's proposals in these words:
The truth is that the Government's so-called incentive proposals bear all the signs of a cockshy—and a compromise cockshy at that. If they reach the Statute Book in their present form I shall be surprised. They are certainly a dusty answer to people who thought that Mr. Callaghan meant business when he talked three weeks ago of 'new plans to encourage industrial investment for expansion and modernisation', and that Mr. Brown was sincere when he said that 'investment lies at the heart of the Plan'.
Even now these proposals are half-baked. In his opening remarks the right hon. Gentleman did not even deign to explain the position in relation to agriculture. Does he even know? I do not believe that he does. In the White Paper, one finds that a decision has been taken to withdraw the investment allowances, but nothing, not even the system of cash grants proposed for the rest of industry, has been put in their place. All we are told is that details will be announced as soon as possible. Meanwhile, the farmers are not given a clue as to what is to happen about incentives for them.
What has been the consequence of the Government's indecision since the Chancellor of the Exchequer, in November, 1964, first threw doubt on the investment incentives which he had inherited from the previous Government? What has the right hon. Gentleman and his colleagues achieved? I should like to quote from the progress report of the First Secretary's own Department for last month. I hope that the First Secretary will do me the courtesy of listening to me and to my arguments as I did to him. Perhaps he would like to comment on this. The reality of the situation and the consequences are here.
This is what the Department of Economic Affairs said:
The volume of private industry's investment which had been rising strongly for two years seems to have levelled off in the second half of 1965 in the manufacturing sector and to be declining slightly in the distributive and service trades.

This is what the Government have achieved. So much for the National Plan.
I turn now to the second objection which I mentioned at the outset, the difficulties of administration. At present, the system of investment allowances is administered by the Inland Revenue. In industry, an accountant who produces a company's figures for the Inland Revenue also, as a by-product, provides the necessary information about capital expenditure which qualifies for the investment allowance. Furthermore, of course, the mechanism of agreement with the Inland Revenue is a simple one, and the procedure which they follow is well-established.
Now, the Government propose to abandon the whole of this system and to substitute a new one which industry does not want. But what really takes the cake is that, although the new system of Corporation Tax and cash grants, as compared with the old system of company taxation and investment allowances, will involve the payment of millions of pounds less to industry, the President of the Board of Trade has admitted that he will need more than 1,000 extra civil servants to administer the scheme and that the extra administration will cost the taxpayer an additional £2 million a year. I repeat that all this swollen bureaucracy is in pursuit of a scheme which industry does not want.
Of course, for every additional civil servant at the Board of Trade, there will be at least one extra man in industry engaged entirely in non-productive work. As the Confederation of British Industry has said:
Industry had better prepare itself for a spate of form-filling.
It certainly had.
In other words, to implement proposals which are designed to save labour, the Government are presenting the nation with the most labour-intensive scheme which they could possibly have devised. None of this extra administrative work is the fault of the President of the Board of Trade or of the Board of Trade itself: it is inherent in the Government's proposals. There will, for example, be interminable arguments about where a qualifying manufacturing process ends and where distribution begins—something which the right hon. Gentleman did not even deign


to touch upon, although it has been referred to, in one article after another, as one of the great difficulties of his scheme.
It is true that one outstanding advantage of the scheme is held out. That is the proposal to make payment within six months, whereas, as is pointed out in paragraph 15, I think, of the White Paper, the benefit of investment allowances is not felt for about 18 months. This, of course, is what the First Secretary told us today. But why did he not go on to say that, after having had our appetite whetted, if we read on to paragraph 25, we find it stated there that the time of repayment will initially be set at 18 months, and that it will be reduced not when the bureaucracy is ready and able to do so, but only
…as soon as the economic situation permits."?
We have heard that one before.
I turn next to a remarkable principle of the system of cash grants, which apparently is not a mere by-product of the scheme, but part of the right hon. Gentleman's design. This is the Government's deliberate intention to pay investment grants regardless of profitability. The philosophy is summed up in one sentence in the White Paper:
Investment involves risks, and grants reduce risks in a way in which an allowance dependent on the success of the investment does not.
In other words, it does not matter how reckless investment is—the company may never make a profit and it may never pay a penny of tax—but now, under the new scheme, it can always rely on a hand-out from the Board of Trade. There is, in future, to be no distinction whatever between the efficient who earn profits and the inefficient who do not. They all get the grants.
I must say that this proposal is a pretty rich one, coming from the Chancellor of the Exchequer, who, during the last Finance Bill, complained that the system of investment allowances could, in certain circumstances, cause money to be paid to companies who had not paid tax in the first place. This was his complaint again and again.
Of course, it is true, as the White Paper points out, that grants, unlike investment

allowances, can provide help for new enterprises which have not yet begun to earn profits. But in that sort of case, the investment allowances accrue and would be taken into account in due course when the company began to earn profits. Certainly, most go-ahead compaines in that category, if they were any good, would not be held back by the present system.
But even granting that a few companies would forge ahead more rapidly with cash grants, which was the First Secretary's argument, surely one has to balance that against the undoubted disadvantage of divorcing the grants from profitability. The danger is, of course, that the Government will be providing hand-outs for those enterprises which are simply not efficient enough to benefit from tax allowances. What the Government are doing in this respect is once again to undermine the normal commercial disciplines which is entirely in line with the whole philosophy behind the Corporation Tax.
I now want to turn to the fourth and, perhaps, most important heading which I mentioned. That is the actual effect of the new proposals for particular industries in terms of hard cash. It is a remarkable thing that the First Secretary, in all that he said, did not have the courage to give one single example of the way in which this works out in practice—not one. It has been left to others—to commentators, for example—to do this. I will now give him one or two examples and if he does not agree with me, perhaps he will get up and say so. These proposals follow the review of investment incentives which the Chancellor announced last April at the same time as he announced the details of the Corporation Tax. They are, as he has said, part of a comprehensive change from the system of company taxation which this Government inherited from the Conservative Administration.
What I propose to do, therefore, is to compare, in terms of cash, the value of the capital allowances which operated during the last year of the Conservative Government, with the value of the allowances and grants now proposed under the system of Corporation Tax. I shall assume Corporation Tax at a rate of 40 per cent., because, as the right hon. Gentleman will doubtless agree, the


higher the rate of tax, the greater the value of the capital allowances. I am, therefore, taking the most favourable figures from the Government's point of view.
The comparison between the old system and the new in terms of hard cash reveals what I can only describe as a confidence trick. But it will not succeed, because not all the loquacious bonhomie of the First Secretary can smother the actual financial consequences for individual businessmen when they come to work out their own figures. I will give a number of examples, all of which are typical.
Consider, first, £1,000 spent on manufacturing plant or machinery which qualifies for a 15 per cent. annual allowance; for example, electric motors, lathes, electric plant and machinery, and so on. The expenditure of £1,000 on any of these items during the last fiscal year for which we were responsible, say, in 1964, qualified for an investment allowance of 30 per cent., an initial allowance of 10 per cent. and annual allowances of 15 per cent. In other words, that £1,000 of expenditure qualified in the first year for tax relief on £550, and that worked out at an actual cash benefit to the company of £296.
Under the new scheme of Corporation Tax and the investment grants now proposed, the investment allowance is scrapped. There will be no initial allowance where the new grant is paid and the manufacturer will be entitled to only the new grant at 20 per cent. and to an annual allowance of 15 per cent. on £800. The result will be a cash benefit in the first year of £248 compared with £296 for the same expenditure in 1964.

Mr. Jay: Mr. Jay rose—

Mr. Barber: That represents a cut of £48 on every £1,000 spent—£48,000 per £1 million of capital investment. And, of course, the cash benefit in each succeeding year will be less than it would have been under the old system.

Mr. Jay: The right hon. Gentleman has given the figures for the first year. Will he now give the figures for the whole life of the plant?

Mr. Barber: I have just done that. If the right hon. Gentleman denies that

what I say will be the position, I hope that he will rise and say so immediately. I said that not only is the cash benefit less in the first year, but that in each succeeding year it will be less. If the right hon. Gentleman doubts this—and I have had this checked independently by two accountants—I trust that he will say so now. Is there any year over the whole life of the plant when he believes that the cash benefit under the new system will be more than it was under the old system in 1964?

Mr. Jay: Yes, in a great many cases, over the whole life of the plant, but I will give the details later.

Mr. Joel Barnett: Would the right hon. Member for Altrincham and Sale (Mr. Barber) compare the position of the company which purchased a piece of plant under the old system and then under the new system from the retained profits point of view to see whether those profits would have been more or less than they will be under the new system?

Mr. Barber: We are here considering a document entitled "Investment Incentives". If the hon. Gentleman wants to discuss the position of a particular company and the whole tax complex now compared with what it was, that is another matter. I am pointing out, on the question of the incentment to a company to invest, that the blunt effect is that the incentment now is less than it was in 1964.
I will give another example. If one considers plant and machinery qualifying for an annual allowance of 20 per cent.—for example, precision plant and machinery which wears out more quickly than the other plant I mentioned—one sees that the difference between 1964 and the new system is a cut in the first year of cash benefit amounting to £58 10s. on every £1,000 of capital investment, and I repeat that the cash benefit in each succeeding year will again be less than it would have been under the old system.
In the light of these figures, how can any member of the Government claim that the system which the Government are now proposing will provide for the average manufacturer a greater financial incentive to invest than the system which hon. Gentlemen opposite inherited from the Conservative Government?

Mr. George Brown: Does the right hon. Gentleman see where his argument is taking him? His argument is not directed to the issue of whether the cash grants are better than investment allowances. He is saying that it is better to take more of the profits in the form of taxation in order that one can give some more of it back.

Mr. Barber: That is an extraordinary statement coming from the right hon. Member, from a Government who have increased taxation on companies. This is incredible. What we are concerned with here—as the First Secretary purported to say in his opening speech—is the question of investment incentives. The incentive to invest which the right hon. Gentleman is trying to provide is a financial one. However, the blunt fact is that if one considers what happens in terms of hard cash, the financial incentive is less than it was under the system which the Government inherited.
I will go on from there. Consider, for example, those industries where the investment allowance is withdrawn but where, in their wisdom, right hon. Gentlemen opposite have not even seen fit to substitute an investment grant. This is of immense importance to the development districts. Consider, for example, the construction industries. In 1964, those industries spent £55 million on plant and £40 million on vehicles. It is obvious that the size of the capital allowances for these industries is of crucial importance, and, certainly, hitherto the First Secretary has recognised the importance of a high level of investment in those industries.
In this connection, I will quote two passages from the First Secretary's National Plan and then explain what the right hon. Gentleman is now proposing. The National Plan stated:
It is clear that it will not be easy for the construction industries to meet the rise in demand expected up to 1970. Success in rising output will depend upon the continuing rise in productivity…
The National Plan also stated:
Greater productivity—
in the construction industries—
requires greater investment in plant, machinery and buildings".
I will tell the First Secretary what he is doing. I again take the example of

£1,000. For every £1,000 spent—for example, on a builders' crane or similar plant—in 1964, the cash benefit of the allowances then in force amounted to £296. Under the right hon. Gentleman's proposals the cash benefit will fall to £180, a cut of £116, for every £1,000 of investment. Is that what the right hon. Gentleman has set out to achieve? It should be realised that for the construction industries there is no extra tax benefit whatever in the development areas.
We are told in the opening paragraph of the White Paper that one of the purposes of the change is to strengthen the balance of payments. So let me quote another paragraph from the National Plan:
Improvements in transport will be important factors in achieving greater industrial efficiency, increasing exports and improving the balance of payments in other ways".
What is the right hon. Gentleman now proposing? If the proposals in this White Paper are implemented, the actual cash benefit in the first year of purchase of a goods vehicle costing £2,000 will be £259 less than in 1964—and, here again, I repeat that in each succeeding year the cash benefit will be less than it would have been under the old system.
Can anyone seriously pretend that this extra burden on the transport industry will not, in due course, be passed on in the form of higher charges and higher prices—and, of course, this is bound ultimately to have an effect, perhaps only marginally, on our export prices? Even in the case of buses, precisely the same policy is proposed. For example, the first year cash benefit on a double decker bus—which, I am told, costs about £6,500)—which was £2,271 in 1964 will now be cut to £1,430. Where now are all those heartrending pleas we used to hear from hon. Gentlemen opposite for a better deal for the travelling public in the rural areas? And what of the repeated requests which were made by the hon. Gentlemen opposite, supported in the Lobbies in our debates on Finance Bills, for special taxation incentives in the development districts for the distributive trades, service industries and hotels? Year after year we had it. Year after year hon. Members opposite voted in favour of those things.
I looked up the last debate we had on the Finance Bill of 1964 and I felt that


the argument was put most succinctly and persuasively by the hon. Member for Glasgow, Craigton (Mr. Millan), now a member of the Government. He said:
There was a time when the Government poured scorn on any suggestion from this side of the Committee that, when one considered the dispersal of employment and the imbalance of employment opportunities in different parts of the country, office development was extremely important—in some ways just as important as industrial development. It is certainly becoming increasingly important as a higher percentage of the employed population become employed, not in production but in distribution and commerce."—[OFFICIAL REPORT, 10th June, 1964; Vol. 696, c. 517.]
The hon. Gentleman must now be disillusioned, because not only have the Government not extended the capital allowances to shops, offices and hotels in the development districts—for which the Labour Party repeatedly voted when in oposition—but are now actually proposing in this White Paper to withdraw both investment allowances and free depreciation from all development districts in respect of hotel equipment, despite the fact that, as the right hon. Gentleman will admit, the tourist industry is one of our biggest dollar earners.
The Government are proposing to withdraw the same allowances in development districts from all office equipment except computers, and from all the equipment in shops which previously qualified. If the purpose of the Government is to encourage investment, to increase productivity and so save manpower, which, I thought, was the burden of the right hon. Gentleman's opening remarks, does he not realise that to save manpower in a service industry and make it available to productive industry is just as laudable as to save manpower in productive industry itself?
My fifth and final point on the first White Paper is the implication for regional development. I do not believe that there is any difference between the two sides of the House as to the objectives. The object of my right hon. and hon. Friends was clearly stated by my right hon. Friend the Leader of the Opposition last year, when he said:
Our philosophy can be described in the three purposes we set ourselves: first, to develop the resources of a region while maintaining its own characteristics; second, to secure a more even spread of the economy over the whole country in order to enable it to operate at a higher level without strain in any particular area; third, to create a way

of life appropriate to each region so that those born there would prefer to work and live there rather than emigrate, and others would be prepared to go there with their families, build up their businesses, and spend their lives there.
I do not suppose that the First Secretary or anyone else would now quarrel with those aims. The differences between us concern the best methods.
My right hon. Friends here developed the concept of growth points or growth areas. As far as we can see, this concept has now been abandoned by the Government. The right hon. Gentleman did not say so in terms, but it seems to be the consequence of what the Government are doing. The Times certainly commented very adversely on these proposals, pointing out:
Once again, the crutch is to be substituted for the encouraging hand.
I have no doubt that in due course—I hope—we shall have a full debate on regional development, so I shall now content myself with saying only this. Whatever may be the merits of the extension from development districts to development areas, it is the fact that the discriminatory incentive to industry to move to development districts has been reduced. On top of that, the Government have decided to abandon in development districts both investment allowances and free depreciation, and have also decided not to provide even investment grants for a whole variety of service industries. Those two decisions, taken together, must hit the development districts.
If I deal more shortly with the White Paper proposing an Industrial Reorganisation Corporation than I have the first White Paper, I do so for two reasons: first, because there is not in this White Paper the detail which is set out in the other; and, secondly, because it is in much more general terms—and from the speech we have had from the right hon. Gentleman this afternoon we have certainly learnt little more about the proposals the Government have in mind. But there are seven facts about this proposed new Government venture into industry which we do know, and I should like very briefly to remind the House what they are. If the First Secretary does not agree, I hope that he will intervene.
First, the nation is to provide this new State Corporation with £150 million—


£10 for every family in the land—and it is specifically stated that this is only the first tranche. Power is to be taken to invest more money when the £150 million has been used up. Is that correct? This is what is stated in the White Paper.
The second known fact is that the new State Corporation will be able to invest Exchequer money at will in any existing industrial company in Britain.
Third, the new Corporation will have power to set up businesses to undertake new projects.
Fourth, if the new State Corporation is involved with existing companies in a merger then, unlike every other manufacturing enterprise in the country, the merger will have total exemption from any investigation by the Monopolies Commission.
Fifth, although the White Paper refers to the new Corporation as being able to acquire a stake in the ownership of industry and there is to be power to take up equity holdings, the First Secretary admitted in the House on 25th January, first, that power will be taken to acquire majority equity holdings in businesses either existing or new and, second, that there will be nothing to prevent the Corporation from retaining that majority shareholding.
Sixth, although this proposal is of the utmost significance to British industry, the First Secretary never saw fit to consult the Confederation of British Industry. I was astonished that three times during his remarks this afternoon on the new Corporation the right hon. Gentleman had the audacity to refer to what was said by the Director-General of the C.B.I. Has he not even taken the trouble to find out what the Confederation thinks about this? Does he never read the newspapers? If not, I will remind him.
Last Thursday, The Times, in an article under "Industrial Notes", said:
Reorganisation Body Upsets C.B.I.
Time has only served to accentuate the Confederation of British Industry's misgivings about the proposed Industrial Reorganisation Corporation since the Government's intentions were disclosed in a White Paper last month. Had the C.B.I. been permitted an advance sight of the scheme representations against it would certainly have been made before publication.
The article goes on:

The confederation's economic committee is now preparing a strong case against the I.R.C. idea.
Perhaps the right hon. Gentleman will now tell us why he chose on three occasions to quote what had been said by the Director-General of the C.B.I. in favour of this particular scheme. Perhaps he will tell us that. Was he trying to give the impression that the Confederation was in favour of it, or was he not?

Mr. George Brown: I think that the right hon. Gentleman is being a little silly. I quoted the Director-General of the C.B.I.—whom I know very well and for whom I have the highest regard—because what he said was relevant to the argument I was making and to the decisions we had taken. The Director-General of the C.B.I. is, of course, entitled to his own views as to whether this wholly meets it. I can tell the right hon. Gentleman that he is making an awful mistake going up this road, because he refutes what I have said is true: that many of the most distinguished, forward-looking and progressive members of the C.B.I. are in favour of the scheme. And I may remind the right hon. Gentleman that the Chairman is Sir Frank Kearton, who is a very prominent member of the Confederation.

Mr. Barber: If the right hon. Gentleman now wants to shy away from what he said—[HON. MEMBERS: "No."] Oh, yes. The First Secretary tried to give the impression that the Confederation of British Industry was in support of the venture. If he wants to get on that tack by saying that Sir Frank Kearton is in favour of the scheme, are we on this side to say that Sir Paul Chambers—a prominent industralist—and every member of his board is against it?
The seventh point which we know about this organisation is this. It is not without significance that the proposals in this White Paper are dead in line with the proposals for extension of public ownership in "Signposts for the Sixties", under the title of "The Capitalist Begging Bowl", and that the first mentioned Minister with whom it is said that the new State Corporation will operate is the Minister of Technology. The right hon. Gentleman went out of his way again to say that we on these benches and anyone else need not be at all suspicious


about the proposals in this White Paper. But as Mr. Aneurin Bevan once said:
Why gaze into the crystal when you can read the book?
Let me remind the House what the Minister of Technology, the one Minister mentioned in the White Paper—apart from the Minister of Public Building and Works in connection with the construction industries—said, not in the dim distant past, but less than six months before he joined the Government. He said:
There is no reason at all why public ownership should not be put into the new and modern industries right from the word 'go'. It should also be obvious that some of the industries in which the greatest progress has to be made and where the greatest investment has to be put in, will not develop properly unless they are in public hands.
Is that still the view of the right hon. Gentleman; is it indeed the policy of the Government? On a matter of this kind when we are considering a White Paper which seeks to give these powers, we are entitled to know the answer.
We are entitled to know the answer because the powers that it is proposed to give this new State Corporation are such as to enable it to extend public ownership precisely on the lines advocated by the Minister of Technology. I remind the House that, apart from the reference to the Ministry of Public Building and Works, the only Ministry mentioned for co-operation with the new State Corporation is the Ministry of Technology.
Hon. and right hon. Members opposite may object to my quoting from what the Minister of Technology said six months before he joined the Cabinet, but I remind the First Secretary—if he will give attention, because I want to direct a question to him in case he is bored by what is being said by his right hon. Friend—of what the Minister of Technology said in the House of Commons six months after he joined the Cabinet. He was asked by my hon. Friend the Member for Brentford and Chiswick (Mr. Dudley Smith):
In view of what the right hon. Gentleman has seen, has he abandoned the idea of State-owned machine tool industries?
The Minister replied:
Certainly not. I said that we would undertake a study and take such steps as are appropriate.
On the same day my hon. Friend the Member for Worcester (Mr. Peter Walker) asked:

The right hon. Gentleman has now been Minister for six months. Will he confirm that during that six months he has come across no section which he wishes to put into public ownership?
The Minister replied in these words:
I have come across a number which I would like to bring into public ownership. That answers the question directed to me."—[OFFICIAL REPORT, 27th April, 1965; Vol. 711, cc. 194, 197.]
It certainly does, and the terms of this White Paper give power to do exactly what the right hon. Gentleman said he wants to do.
The Minister of Technology is at least straightforward. I ask the First Secretary whether he will be equally straightforward and tell the House now whether he disagrees with his right hon. Friend. I am putting a question to the First Secretary. I listened to him with courtesy; he might perhaps do the same to me. I am asking him whether he disagrees with his right hon. Friend the Minister of Technology, who is the one other Minister of significance named in this White Paper to co-operate with this body. Does the First Secretary agree or disagree with him? [HON. MEMBHRS: "Answer."] The House can draw its own conclusion. There is only one conclusion to be drawn from the right hon. Gentleman's silence.
What the Government should now be doing is to pursue policies which stimulate competitive enterprise, not stifle it; to implement the proposals of my right hon. Friend for rooting out restrictive practices which are inhibiting competition, which were mentioned in the White Paper published at the time when he was Secretary of State for Industry, Trade and Regional Development, and to extend the scope of the Companies Bill by implementing far more of the Jenkins Committee Report which aimed at making the economy more responsive to public pressures. Instead, we are presented with two White Papers which aim to use the fiscal system by discriminating against particular industries and empower the State to invest at will in the equity of British industry.

Mr. George Brown: Mr. George Brown rose—

Mr. Barber: No. The right hon. Gentleman would not answer my other point. He can allow his right hon. Friend to deal with this point in his reply. I


will give way to him willingly if he will answer my question first.

Mr. George Brown: The right hon. Member is acting in a very silly little way. What he has just said shows that he has not either got hold of what I said this afternoon or of what the White Paper does. He may have chosen to disbelieve what I said. I do not think he did that, for he does not normally behave in that way. This Corporation is not a way for the State to take power, as he suggested, to invest at will in British industry. I was very careful to say that that is not so. The White Paper makes it clear that the Corporation will not have the power to do so.
As to his previous point, I did not answer the right hon. Member because what he said my right hon. Friend said—I have not checked it, but I take his word for it—has nothing to do with this Corporation. This Corporation will not have powers compulsorily to nationalise industry. I answered this this afternoon in my speech. It will have no compulsory powers at all. The right hon. Member is right bang off the beam.

Mr. Barber: I have never suggested that the powers of the Corporation are compulsorily to nationalise, but it can invest at will. The right hon. Gentleman and I have powers to invest at will in any company if we buy the shares. The Corporation, according to the White Paper, also has power to buy the shares.
In reply to the latter part of the right hon. Gentleman's answer, I think it a little discreditable that when I asked a specific question and gave way on the understanding that he would answer it, the right hon. Gentleman did not do so. I asked a specific question and he rose on the understanding that he would answer it. I ask again, does the First Secretary disagree with the Minister of Technology?

Mr. George Brown: The right hon. Member is not acting in accordance with the standards of this House. [HON. MEMBERS: "Oh."] He is acting in accordance with the standards of debate of hon. Members opposite. I heard what he said about what my right hon. Friend said. I do not know more about it than that and I should need to check it in its context.

The answer is that, if my right hon. Friend said what it was said he said, that is no—[Interruption.] Oh, do not play that sort of game. For goodness' sake let us try to conduct the debate on a level of the importance of the subject whichever way go the merits.
Let us assume for a moment that I accept the whole context. For the reasons I gave, and which the right hon. Member either will not or cannot accept, it would still be totally irrelevant to the issue that we are discussing today.

Mr. Barber: I will pursue it no further. It is apparent to the whole House that the right hon. Gentleman will not answer the question.
Both these measures are a recognition that this Government do not believe in either the free enterprise system or, more particularly, in the working of a market economy. This is not the way to foster industrial modernisation. This is Socialism masquerading as modernisation and we on this side of the House reject it.

5.20 p.m.

Mr. Harold Lever: I ought to say at the outset that, if I give way to anybody, I shall not attempt to lay down conditions as to what they should say when I have given way. I may appreciate or be disappointed by the use made of any intervention of this kind, but I regard it as a breach of the procedure of the House for anybody to attempt to lay down conditions for giving way to interventions.
There are two White Papers before the House. I begin by saying that the more important one on Investment Incentives is not one on which I propose to offer detailed comment. That may afford some relief to those of my colleagues who are anxious to speak. I wish only to say that the old system of investment incentive was not one that I loved. I thought that it ought to be altered. I thought that a greater degree of selectiveness ought to be introduced. I must confess that I have not yet studied the terms and details of these proposals and their consequences to an extent sufficient to enable me to express that uncritical affection which would be attractive if I could sincerely offer it to the House. At this point I hope that the House will excuse me if I make no comments upon the


White Paper on Investment Incentives, because I should like more time to study its consequences in detail. I shall confine what I hope will be my brief remarks to the question of the I.R.C.
The right hon. Member for Altrincham and Sale (Mr. Barber) was clearly wrong in attempting to make us believe, other than as a debating point, that my right hon. Friend the First Secretary of State and Secretary of State for Economic Affairs seriously wanted to mislead the House into supposing that Mr. Davies or the C.B.I. had an affectionate interest in this new and yet unborn child—the I.R.C. Clearly not. The whole world knows that the C.B.I. is rather against this idea and against giving it a trial. What my right hon. Friend was doing was quoting in detailed support of his own thought processes the ideas of the C.B.I. and of Mr. John Davies that accorded with the thinking which led him to produce this White Paper.
It is very difficult for all of us to assess this Corporation, because it is not in being and the Statute which is to create it has not been laid in detail before the House. So we are all a little in the dark. I shall, however, make some general observations. I am open to criticism if I express undue or unqualified enthusiasm for the child which has not yet appeared. Equally, the Opposition are in the difficulty that in estimating the Corporation's consequences they must wait and see the details of the Corporation and also of the way in which it will work.
Naturally, the putative father will express a certain degree of uncritical enthusiasm as to the child's prospects. Naturally, he supposes that it will be a flourishing infant and a great success. Perhaps it will be so. The question is whether the idea is fundamentally a sound one which should be given a trial. I have come to the conclusion that it undoubtedly is. There is undoubtedly a need for a specialist body of this kind which ought to be tried on a significant scale, carefully staffed, and carefully watched to see its progress. It is not true to assert that at present the ground is covered by existing financial organisations. There is no organisation in the City or elsewhere in the country with adequate financial resources that

specialises in merger and innovation as this new body will do.
Far from this representing a threat to existing financial organisations, I suggest that it will be of great advantage to many of the merchant batiks and existing organisations to know that they can work in co-operation with this new body, amply endowed with Government funds and able to take a longer view of some of these mergers and innovations than existing financial organisations can This is particularly important in the export field. Whatever may be said about the desirability of scale in industry—some people uncritically assume that scale and merger are always desirable, but this is not so—scale is certainly desirable in the export trade. In the export trade it is virtually impossible to be a significant exporter unless one is part of a large organisation. All the records show that it is the large firms that disproportionately contribute to our export trade. Therefore, merger is all important if we are very keen to get our export trade going at a higher level.
I welcome the idea of a specialist organisation. I do not feel that the ground is adequately covered by existing organisations. I emphasise what I was glad to hear the First Secretary emphasise, namely, that it is co-operation with existing financial corporations which is to be looked to, not competition or displacement. In particular, I suggest that there is a gap in financial arrangements at present in this area. Merchant banks will provide a great deal of short-term and bridging finance for a suitable merger. Joint stock banks, too, will provide a good deal of short-term finance for that purpose. Long-term finance in the form of debentures, fixed interest investment or even equity investment, can be often obtained from insurance companies and like institutions. But medium-term finance is rather lacking in this field. The banker or finance house that will put up a substantial sum of money and leave it there for between 5 and 15 years is rather difficult to find. Long-term finance on a big-scale is available. Short-term finance on a reasonable proposition is pretty easily available. But the man who is not able to get long-term finance, and who does not want to be under the constant stress of an immediately callable


overdraft to finance his innovation or merger, has not really got an adequate supply of funds.
A specialist body of this kind with ample funds will meet a very real need. I venture to suggest that the Opposition would be foolish if they were to commit themselves to the view that industry and finance will oppose this proposition, because when this Corporation comes into being the Opposition will be surprised to find that industry and finance, particularly the alert and flexible merchant bankers in London, will be inclined to recognise that the new organisation can be of real use and will provide an avenue for cooperation for the existing institutions.
The argument that this is nationalisation by the back door is a non-starter. I hope that I shall be forgiven some general remarks about the mixed economy. There are those on both sides of the House who like to pretend that that we have not got one, and in so pretending they are determined to make the worst of both worlds. I start, as it is fairer so to do, with my own side of the House. Some of my hon. Friends think that we are running a Socialist economy and that the free enterprise or profit-making side of industry is there on sufferance, but that it should work with great enthusiasm and should expand and be efficient, although we hate it and do not want it to play any permanent or semi-permanent part in the life of the country. This is an impossible attitude. All that it achieves is to get the worst of both worlds. If the view is taken that private enterprise should not run an area of the economy, then take it over, but do not leave that area in private hands, being run on a profit system, and being insulted or treated with continuing hostility.
Equally, on the other side, there are people who think that private enterprise and the profit-making system are ex hypothesi virtuous and that anything which is publicly owned is disastrous, inevitably wasteful and to be deplored. That view is just as destructive and is just as likely to produce the worst of both worlds as the other idea which I have stated. It is only on some such astonishingly reactionary view of things

that the right hon. Gentleman tried to argue that the amount of money involved in what is, on the face of it, intended to be a constructive, realistic operation was no less than £10 for every family in the country, that is, rather less than the average spent by every family in this country in the betting shops and casinos which proliferated under Conservative rule. I confess that I would rather see it spent experimentally in this direction than see it spent in that way.
The trouble with right hon. and hon. Members opposite in this interregnum is that they are actually becoming a good Opposition. They have a natural talent for the rôle, and my belief is that this natural talent will be recognised by the people of this country, and we can all hope to derive benefit from it. I am not saying this only facetiously, though I cannot contend that it is one of the more profound and solemn points of my speech. Right hon. and hon. Members opposite are by nature of a critical and negative disposition, which is entirely suited to opposition, whereas my right hon. Friends are of a creative, inventive and innovatory disposition, which is ideally suited to government in the kind of circumstances in which we find ourselves. I am sure that it has not been lost on the British people that constructive, inventive and innovatory government such as we have needs constant checking and critical attention of the kind we have had an example of today, in part, from the Opposition. Long may it continue.
On the other hand, I want the Opposition to improve. At the moment, they strike me as being rather like the manufacturers of an inferior electric lamp who, when they find that it is not selling too well, begin to wonder whether they really ought to have given up making gas mantles. The right hon. Member for Wolverhampton, South-West (Mr. Powell) always tells them that this was a fatal error on their part, that their public image is as gas mantle manufacturers, and that woe and disaster are bound to overtake them as a result of forsaking that noble Victorian rôle. The right hon. Member for Altrincham and Sale, on the other hand, is by nature an electric lamp manufacturer. He must argue his case not in terms of the gas mantle but in terms of the electric lamp.
I submit that the people of this country are little interested in the theological disputations about the boundary lines of equity ownership in Government hands or in private hands. The country expects the Government to use all flexible and undoctrinaire methods to get the country on its feet, to make it pay its way and to increase prosperity.
It has not been altogether realised that, since the war, the Government have, rightly, increasingly taken responsibility, even under Conservative Administrations, for the central economic direction of the country. This involved a great responsibility. Of course, some have been inclined to say, every time the Government intervene, that this is in some way a threat to democracy. I leave this thought with the House. The greatest threat to democracy lies in failing in our economic tasks. The overthrow of democracy in the years before the war, in the collapse of the Weimar Republic and so on, came precisely because people were afraid to take the bold and courageous steps necessary to make an economic success of their affairs, while all the time keeping their eye on political success.
We must make a political success of our affairs and an economic success of our affairs. Far from being a threat to our democratic hopes, the Government's action gives an absolutely firm basis for success, without which we cannot hope to perpetuate and extend the prosperity and free system which we enjoy in this country.

5.33 p.m.

Mr. J. Grimond: We are discussing two White Papers and, naturally, we shall have to wait to see the detailed proposals under these White Papers when they arrive. All we can do today is express a view about the aims of the White Papers and reserve our judgment, as the hon. Member for Manchester, Cheetham (Mr. Harold Lever) said, on the particular proposals which are brought in to achieve these aims.
We cannot conduct this discussion very usefully if we treat it simply as a sort of ping-pong match between complete laissez-faire capitalism, on the one hand, and Socialism, on the other. In many ways, my party would like to attain to

a more extreme form of competition in some parts of the economy. But we know very well that the economy must run as a partnership and that a large sector will remain in public control of some sort.
The debate today should be, first, about how we are to make the whole economy more efficient, and, second, about how we are to establish criteria for judging that part of the economy in which the market does not apply. It has been most noticeable over the past five or six years that the only people to nationalise a firm in this country have been the Conservatives. It is not the supporters of the Labour Party who are pressing the Government to intervene at the moment; it is Messrs. John Brown, it is Fairfields, it is the big industrial companies who are, at the same time, said to be the spearhead of extreme competition. But they are not saying, "Send us to the wall. Shoot us with competition, and get us out of the way". Far from it. They are saying to the First Secretary of State, "Please come in. Put Government money into our enterprises. Save us, save us". This is not to say whether one is in favour of these things or against them. Those are the facts of economic life in this country.
The cries of free enterprise are extremely muted. There is no great passion for competition among the joint stock banks, for example. They are not anxious to stay open longer, one against the other, in order to compete. The discount houses, one of the directors of which is one of the chief exponents of free enterprise, are not clamouring for free competition and free entry into the discount market on all occasions.

Mr. Harold Lever: When one of the joint stock banks undertook the floatation of a debenture not long ago, some merchant banks, such are the restrictive practices, very foolishly thought that that was their area and protested against it.

Mr. Grimond: I am much obliged to the hon. Gentleman. We may complain about the plumbers' union and all that, but the restrictive practices in force in many ancient citadels of free competition would, I am sure, arouse envy among the most reactionary trade unionists.
What this country must do is get more productivity, and what emerged from the recent television programme was that this


is a very difficult idea to get across. We must give full credit to the First Secretary of State for trying to get it across. If there are plenty of Government public relations officers at his disposal, the right hon. Gentleman should put them on to finding new methods, even some new language, for getting this idea across.
In the forefront of the battle for higher productivity stand the Government. We cannot get away from that. They have to show the lead and there are various things which they can do. First, they can step up efficiency within the Government itself. This is relevant to today's debate because one subject of discussion is whether we should have yet another corporation, the I.R.C. In my view, one area calling for modernisation is the whole machinery of Government as well as of the industries under their direct control. I do not believe that more Royal Commissions, more corporations and more committees are the answer to this problem. Indeed, they are an evasion of it.
I was impressed by the First Secretary's speech because it seemed to me, first, that, contrary to what was said from this side of the House he deliberately avoided antagonising the free sectors of the market and, second, he came out firmly with the view that a great deal of the economy must run on the profit motive. He did not use those words, but he accepted the thinking behind them. At the same time, he made clear that the boundaries between the public sector and the private sector are shifting and, no doubt, shifting in each direction.
We want from the Government more clear statements of the way they see the economy run. The sooner they tell us their ideas for the relationship of that public sector and what is called the private sector of the economy, the better it will be. They should not scruple to give their own ideas about how their own Ministries and functions should be comducted. I do not believe that a radical Government should need Lord Fulton, excellent man though he is, to tell them what they ought to think about the Civil Service. This relegation of more and more decisions to ad hoc committees is one of the signs of the very amateurism which dogs the efficiency of this country.
Nor, in my view, is the number of Ministries and the growing size of the Civil Service a sign of dynamic Government. Just the reverse. It is a sign of the failure to fix priorities and to get the fat off the Government service in the way the First Secretary of State wants to get it off the free enterprise part of the economy. To a large extent, it is a sign of failure to devise means of giving direction to the central impetus of the Government and to methods of stopping waste.
Too often in this country the conventional wisdom is simply to leave unreformed existing machinery that is not working and set up a new committee or a new department. We have seen what is happening in local government. New committees are being superimposed on old committees. New Royal Commissions are being set up before the Reports of old Royal Commissions have been acted upon. More and more, this country and the Government are beginning to look like some ancient city, amid the ruins of which one can trace buildings of different ages, one piled on top of another, all higgledy-piggledy, with never an attempt to rationalise the structure and bring it up to date in one move.
Another very important factor is more investment. But it is not sufficient to have more investment. What is also important is what one does with it. It may well be that much investment has been wasted. Nevertheless, the figures of investment in Britain compared with those of other countries are disturbing and have a general lesson for us.
In 1963, the total of 16 per cent. of our national product went to capital formation—an increase of 3 per cent. over 1953. In West Germany, the 1963 figure was 25 per cent.—an increase of 6 per cent. over 1953; in France it was 20 per cent. and in Japan 33 per cent., representing an increase of 16 per cent. over 1953. There is a general lesson in those figures that this country does not invest enough, considering the responsibilities that it has in the world and the need to modernise its industry.
In so far as the aim of the First Secretary of State in these new proposals is to increase investment, he should be supported. It is true that the United States does not invest a very much bigger proportion of its national product than


we do, but of course it has a much bigger accumulation of capital. Furthermore, it is notorious that every American worker has far more power at his disposal than has the British worker.
I do not know whether up-to-date figures are available, but in 1962 every American worker had 12½ h.p. behind him. The comparable figure in this country was between 4 and 5 h.p. We have to bring ourselves up in the scale of investment in machinery if we are to compete and, having invested, we must use it. One of the problems of our economy is that, having put in machinery, we often do not use it to the full.
Thus, we on this bench do not object to the aims of the White Paper but there are questions to be answered and when the detailed proposals come out we hope that some of the details at any rate can be altered. Certainly there was some evidence, for instance, in the booklet "Investment Appraisal", issued by the N.E.D.C., that the old investment allowances and initial allowances were having an insufficient effect on investment decisions by business men. Yet it seems doubtful whether many firms will gain substantially from the new method. I hope that we shall have the figures explained to us because, on the face of it, it seems that many firms will be worse off. It also appears that the old allowances were devalued rather casually as a side-wind from the Finance Act and that had Corporation Tax not been introduced, or had it been introduced in a different form, probably these allowances would have been continued.
What is the thinking behind the new grants? Are they intended to compensate firms for the losses under the Finance Act or to go further? In certain respects the grants will have to be increased. In considering the value of the direct grants, an article in the Financial Times on 19th January, followed by correspondence on 21st January, threw considerable doubt on whether the new system of grants would be of equal benefit to most firms with the old. I believe that they should be and that if we want to achieve the right hon. Gentleman's objective we must ensure that that is so.
In turning to the limitations, I want to repeat a question. Tourism is surely of direct assistance to the balance of payments.

It therefore seems strange that it is excluded—at least the tools of tourism are excluded—from these grants. Further, I understand that vehicles and equipment and aircraft are also excluded. Surely export industries depend a great deal upon the efficiency of vehicles, equipment and aircraft. Certainly, the efficiency, for example, of the aircraft industry and a ready sale at home may be the basis of an export industry. We should have an explanation about the exceptions made to the grants system.
I must say that it is a rather old-fashioned idea for a Government keen on modernisation to hold that there is something intrinsically better about manufacturing than about services. It is not wholly true. Manufacturing is not the only form of activity entering into exports. In all the sophisticated economies, services are taking up more and more of the national effort and surely this is a tendency that we have to accept. I believe we need more explanation about why services, vehicles and, indeed, the tourist industry are excluded.
Then there is the question of the old development districts which apparently are to lose their advantages as development areas are to take their place. I take it that paragraph 19 of the White Paper, which says that other forms of assistance will continue, refers to the new development areas and that the old development districts are to lose the discrimination in their favour.

Mr. George Brown: One does not want to mislead people outside the House. The right hon. Gentleman is right to the extent that a small area—an old development district—within one of the new, larger development areas will not continue to get the unique provision which the rest of the area in which it was situated did not get. It was becoming clear, particularly in Scotland, that we could not act effectively in this way unless we set out to repopulate and, in some cases, to redevelop, in order to bring about economic prosperity and a good social life, much wider areas. We are trying to bring the wider areas up to the level aimed for in the case of the old development districts.

Mr. Grimond: I appreciate that, but parallel measures will have to be brought


in, otherwise some of the old areas will suffer.
I want to deal with the time and method of payment. I understand that it is hoped that the new grants will be paid within six months. This will be of considerable help to industry. Furthermore, it will be a more simple system. Does this mean that the Board of Trade does not envisage examining each application with any greater care? We have not heard about the way in which certain classes of production are to be excluded. We should be grateful to hear a little more as to the sort of discrimination that the Board of Trade will have to use.
Has the Board of Trade considered the case for making the grants negotiable and able to be claimed, so to speak, by the supplier of machinery? The right hon. Gentleman is aware of the scheme. It would mean that the buyer would buy free of the grant, and the seller would be entitled to dispose of the claim, which then would become negotiable, to pass from hand to hand. Many people in industry, impressed by the need for quicker payment of grants, believe that this would be the simplest way. No doubt the Government have examined it. What was the result?
In considering the proposed Industrial Reorganisation Corporation, most people would agree with many of the objectives set out in the White Paper. A great deal will depend on the personnel of the Corporation and how they envisage their task. I believe that too much stress has been put on the provision of finance. I was interested to hear what the hon. Member for Cheetham said about the gap in medium-term finance, but the right hon. Gentleman seemed to envisage a gap in long-term finance. Surely the most important job of the Corporation will be to find, pick out and isolate those areas of the economy which are lagging. Then there may be all sorts of remedies for their poor performance. Finance may be only one of the many reasons why such areas of the economy are lagging behind.
In support of the proposal I would quote the remarks of Sir Denning Pearson in his Fawley Lecture when he said that for some time he had held the view that the small size of units in parts of

our industry was one of our greatest handicaps, both in endeavours to increase our general engineering exports and to improve productivity.
A similar comment is made by Richard Fry in The Guardian of this morning. Although I have deep respect for Richard Fry, as for all who write in that great paper, he has not generally been regarded as a Left-wing economist, but he sums up the matter by saying:
the proposal to fill some of the gaps by intelligent intervention is a good deal better than the alternative of leaving well alone.
Of course, it is possible to do more harm than good by intervention, but I would have thought that there was a gap and that it was rather a gap of finding out what was wrong with certain parts of the economy and that finance might be one of several remedies which should be applied.
I should like to ask a little further why it is not possible to expand the functions of the F.C.I. or the I.C.F.C. for instance, to cover the gap in so far as it is a financial gap. I accept that they cannot as constituted but I am averse to the piling up of committees, but if the F.C.I. and the I.C.F.C. are not covering the gap adequately, why should they not be merged with the new Corporation? Should we not then save some manpower which is very valuable and experienced, and also, make for a more efficient job?
I have one further word of warning. Of late, many of the mergers which are taking place seem to be designed to get round the findings of the Restrictive Practices Court. Where price agreements and so on have been held to be against the public interest, there has been a tendency for the firms engaged to merge. This Corporation should have power to stop mergers—or rather, as it will not have power to stop anything, I hope that it will be able to recommend against mergers as well as in favour of them, and that the Monopolies Commission will still be the ultimate determining factor in the public interest if mergers do not seem to be in accordance with it.
I want to conclude with a few remarks about the next stage of regional development. More than ever it is necessary for the proper management of our economy to try to iron out the discrepancy between the constantly high demand for labour and


the over-used resources of the South-East and the lower demand for labour and under-used resources in other parts of the country. Liberals, of course, believe that the Government have not gone far enough in striking at the root cause of this imbalance, which we believe to be the centralisation of power, and all the top jobs which go with power, in and around London.
Therefore, we would like the new Corporation to be set up on a regional basis and, just as the merchant banks are now setting up regional offices, we believe that the Corporation should operate regional offices and not carry on all its business in the centre of London. As one of its tasks is to be to assist regional development, let it go to the regions to do its task. We also feel that the Government should allow greater participation by the people of the regions in running their own affairs.
The whole new course charted by these investment allowances of the I.R.C. will surely require a new look at the present policies towards regionalism. For instance, if mergers are effectively encouraged and nothing else is done, there is a very good chance that there will be an even greater concentration of head offices, research departments and high level employment in London. Anyone coming from Scotland or Wales or the North will confirm that very often when provincial firms are merged the head office moves to London. This concentration of high level employment is one of the most serious aspects of the problem, and I hope that steps will be taken to counteract it.
I suggest that the Government should balance these proposals with a more vigorous policy for raising the services in areas to which they want employment to move, or where they want to hold population. Housing, schools and roads policies should all have the emphasis on development areas. It is mentioned in the papers this morning that some firms going to Scotland claim to have been misled about the amount of labour available. I have often tried to draw attention to the root of this difficulty. The unemployment statistics in Scotland sometimes show that gross unemployment is very high, but even so they conceal depopulation. One of the main problems is to find jobs for school-leavers. Secondly, they conceal a great scatter of unemployment of

people who find it difficult to move from one home district to another.
Further, they conceal a lack of variety of employment. Whether we like it or not, people want to have a variety of employment. In some districts which were entirely dependent on agriculture, or whatever it happened to be, many boys and girls coming from school simply would not stay in the district. All sorts of things like training and superior services and deliberate attempts through the I.R.C. to set up particular firms to work new industries—it is to have the power to do that—in particular areas where there is a gross lack of variety of employment are needed, and I would like those things to be done in parallel with the aims set out in these White Papers.
I hope that the I.R.C. will not become obsessed with the idea that only big businesses are worth encouraging, although I fully agree that they make a big contribution in the export trade. For instance, would it not be worth considering whether small businesses employing small numbers of people should not be deliberately directed away from the big urban areas, where they now tend to concentrate, into the smaller towns to which they are particularly suitable? Along with the proposals in the White Papers we want all sorts of other parallel action.
I return to where I started—that the House is asked to approve the general principle of these Measures, but that there are obviously many detailed questions to which hon. Members would like answers and that there are criticisms to be made of the White Papers Nevertheless, I would have thought that this was an attempt to attack two of the principal faults of our economy—first, its lack of productivity and, secondly, its regional imbalance, and in so far as the White Papers are an attempt to attack those two faults, they deserve support.

5.57 p.m.

Mr. Robert Sheldon: I was very pleased to hear the general support of the right hon. Member for Orkney and Shetland (Mr. Grimond) for the investment incentives. In particular, I noted that he was worried about the comparisons between the old


allowances and the new grants, but I hope that he is not too influenced by the peculiar comparisons which were made by the Opposition Front Bench between the old allowances and the new grants. It is not sufficient to relate the old and the new systems of incentives just to the tax rate. On this basis, the higher the tax rate the higher the allowance would be, and when the tax rate approached 100 per cent. the allowance would be at its maximum. This is not a very useful conclusion. In fact, the calculations are much more complex and retentions have to be taken into consideration.
In considering investment incentives, the Royal Commission on the Taxation of Profits and Income on page 127 of its Report said:
the whole justification…lies in its service to the economic welfare of the State.
Most would agree with that criterion. I would add the further purpose that investment incentives should assist the modernisation of industry. Investment incentives should be judged therefore not by whether they offend some peculiar principle of neutrality of Government economic decisions as enunciated by the right hon. Member for Wolverhampton, South West (Mr. Powell), but by whether modernisation is assisted and the amount of obsolescence reduced. About the modernisation of British industry there can be no neutrality.
A complete survey of obsolescence in industry was carried out by the ninth American Machinist Inventory for 1963. This was the largest project of its kind, and it showed the percentage of machine tools in American industry more than ten years old. It made comparisons with previous years. The results were rather surprising. In 1925 44 per cent. of the total number of machine tools in use were over ten years old. In 1953 that had risen to 55 per cent., while in 1963 the figure was 64 per cent. Whatever qualifications one may make about these figures—and they are very detailed and comprehensive—the tendency towards an increasing obsolescence is an unavoidable conclusion. Comparable results for this country, although less thorough than this report, show an even greater degree of increasing obsolescence. The conclusion from this is either that the replacement

of the 64 per cent. of machine tools over ten years old is not necessary or that it is necessary but because of the lack of funds, or foresight, or for some other reason, replacement is not made.
The first possibility, that a ten-year-old machine is not an economic liability, certainly applies in a number of cases—the odd bench grinder in the corner is little proof of the inefficiency of an organisation. Cases such as this are few. Few generally would question that advances in the reliability of new machine tools as well as their development pay for themselves very rapidly. New incentives are needed, and the kind of incentives required are those which are readily calculable, most certain in their effects, and which depend much less on anticipating the future changes in taxation and allowances. This we have in the new system of investment grants, which also permits the greater discrimination which I favour. Page 130 of the Report of the Royal Commission on The Taxation of Profits and Income gives the following quotation, which shows the way ahead:
On the whole we think that there is a better method of obtaining more sensitive discrimination than is provided for by the present form of the investment allowance. That would be to sub-divide the present very broad categories of favoured investment and to introduce a range of different rates within those sub-divisions.
I should like to move a little further in this direction, while appreciating the distance which we are being asked to go. But discrimination does not please everyone. The right hon. Gentleman the Member for Wolverhampton, South-West is reported in The Times on 28th January of this year as saying:
Once a political authority decided that one expenditure or investment was economically good or better than others a great divide in human affairs had been crossed.

Mr. John Biffen: Hear, hear.

Mr. Sheldon: I notice that the hon. Member says "hear, hear". Was the right hon. Gentleman saying that it was right that investment incentives were the same for machine tools as fur coats for actresses, for gaming machines as well as for computers? If we have crossed a great divide many of us would say, "And about time, too".
There are those—and the hon. Gentleman the Member for Oswestry (Mr. Biffen) is obviously one of them—who would have the Government provide only the framework within which industry is free to operate to its own and to the nation's good. I am never sure when I hear this what precisely is meant by a framework. If industry is not investing sufficiently, if industry is not modernising adequately, if industry is not providing sufficient growth, then the Government have the right and the duty to intervene. In a modern world these are the functions of Government, and only a weak and hesitant administration would deny it.
Like many others, I am unhappy about the lack of grant for modernisation of other parts of industry. This offends against the principle which I have declared, that investment incentives are to encourage modernisation. After this first priority of modernisation comes also the need to increase capacity. One of the great barriers to growth has been the limitations upon capacity. It is right that incentives which will encourage modernisation as well as increase capacity should be the first choice for such investment incentives, although it is a pity that investment grants for modernisation are limited. Given the need for limitation, the choice has been made correctly.
It is sad that hon. Members opposite have seen fit to follow their supporters in the Institute of Directors and Aims of Industry and make a political issue of the modernisation of our industry. I prefer to rely on the comments of large numbers of industrialists who appreciate the measures which the Government have taken, understand their purposes and welcome their consequences.
The reason why I welcome the White Paper on the Industrial Reorganisation Corporation is largely because of my attitude to last year's Monopolies and Mergers Act. This Act gave powers against monopolies not operating in the public interest, gave powers against mergers not operating in the public interest, but did nothing to encourage those mergers which were in the public interest. This was a power which I wanted to see and which, because of this White Paper, we shall soon have. We shall now have the power to do as well as to forbid.
I am one who welcomes the closer drawing together between Government

and industry, and I believe that this is a movement proceeding irrespective of the Government in power. Some of us are impressed with the record of growth in those countries where industry and Government operate much more closely together than they do here. There have been some doubts about the benefits obtained from the economies of scale in all instances. One of the most important benefits that merging industries can obtain is the use they make of increasing and advancing technology. Plant and machinery can usually be built with a larger throughput and rapid decline of unit costs. In very many types of manufacture there are no real technological limits to the economies of size. The real limitations to size are the information barriers within the organisation. There is a chain in the passing of decisions from management to shop floor and another chain passing information from the shop floor to managers. Where these chains are numerous and tenuous, management may not always have sufficient knowledge of the various situations which it controls.
The barrier of information is the great limiting factor of size. In the past five to 10 years there has been a revolution in the way information has been conveyed. Punched cards, computers, managerial control techniques are some of the most rapidly extending branches of industrial development and few would care to put a limit on the ultimate achievements of these techniques. This growth of information techniques is finally removing the barriers to size with immense consequences to the structure of the industrial organisation.
Throughout industry we hear of appeals for dynamism. No one knows how to create a dynamic organisation. But there is an association between a growth industry and dynamism. This excitement that comes from constant change as well as the natural hopes and fears of promotion and success are the very essence of such dynamism.
In an expanding industry all of this is quite natural. In a stable industry, the stability is due to its slow growth and the products or the services it offers. It grows slowly in a way related to the growth of the economy as a whole. But even stable industries can change their production techniques by enlarging the


scope of the individual units and accepting a new technology.
The connection between merging and subsequent concentration of activities is essential. To merge does nothing in itself, but mergers to co-ordinate productive processes, mergers to make use of new technologies based on size, mergers to use new control and information systems, mergers so that inefficient parts of productive plant can be shed in order to concentrate on others, mergers that can give to executives the stimulus of being in a rapidly-changing, technologically advancing industry, these mergers are valuable and exciting.
The two White Papers we are discussing involve the modernisation and development of industry and they go to the very heart of the industrial problems facing us today. I believe that it is to the Government's credit that they have brought them forward.

6.10 p.m.

Sir John Eden: The first thing which is wrong about Command Paper 2874 is its title. There is precious little "incentive" about the proposals in it. The second thing which is wrong is the manner in which it was presented to the country. A fanfare of trumpets announced its arrival. This was all part of the gigantic "Operation Hoodwink" which appears to have been mounted by the Government to make people believe that they are bringing about a dynamic change in British industry as a result of these and a host of other measures which they have brought before the country.
I regret very much that there will be little additional incentive to invest as a result of the proposal in Command Paper 2874. I regret even more that there is therefore little likelihood that there will be additional investment as a result of it. Although some firms, I well recognise, will be better off as a result of these proposals, and although some industries have been singled out for special attention, the fact remains that unless they go to development areas the bulk of them will not be better off. In fact, they will find very little incentive in these proposals.
It has taken a considerable amount of research and effort to work out the sums. This is the third point which I dislike

about the White Paper. It adds to and extends the confusion on this front for which the Government have been responsible from the moment that they took office. A further period of doubt and uncertainty will inevitably lead to further delay in investment plans. This surely cannot have been the Government's purpose, but regrettably this is the result of the manner in which their proposals have been presented to the country and of the details which they have brought together in this Command Paper.
Turning for my illustration purposes to the other White Paper before us, Command Paper 2889, the opening paragraph of it calls for a fundamental improvement in the balance of payments and goes on to describe the need for new initiatives to meet world competition. It states:
The new system of incentives…will provide a powerful stimulus to modernisation and investment in key sectors of the economy…
This is written in a paragraph which is prefaced with a reference to the balance of payments situation.
One would assume that a definition of the key sectors of the economy was those sectors which contributed substantially to improving the balance of payments position. Such a sector is the tourist industry. Yet it is this industry which is deliberately omitted from the proposals to encourage investment. Far from being just omitted, it is singled out for specially adverse attention by the removal of the investment grants on its equipment, on the tools of its trade.
The National Plan—that document which right hon. and hon. Members opposite love to regard as their bible, their source of all quotations—draws attention to the fact that in 1964 the tourist industry earned £120 million in foreign currency. Last year about 2 million visitors came to this country and passed through the industry's hands. It accounted for earnings as great as £81 million in dollars. It is a sizeable industry, with 600,000 employees. It is not an industry which any Government should shrug off. It is not an industry which the Governments of other countries do shrug off. They pay a great deal of attention to the tourist industry and to the contribution which it can make to their balance of payments situation. Other Governments go out of their way to help the tourist industry


whereas the Government of this country go out of their way to handicap it. This is a most extraordinary proposition in a White Paper labelled "incentive". Where is the incentive to one of the key sectors of industry, except an incentive to go abroad and to take its trade elsewhere?
The Government have handicapped the tourist industry in other ways. Right hon. and hon. Members opposite would do well to note that everybody engaged in this industry sees the White Paper as a further step in a series of measures which appear to have been designed deliberately to make life more onerous and difficult for those engaged in the tourist trade. Entertainment allowances are a case in point. Building licences have been imposed by the Government. There is the removal of the grant on equipment to which I have referred.
Why have the Government been taking steps to harm this industry? I suspect that there may be something in the fact that right hon. and hon. Members opposite associate the tourist industry with the luxury trade. They regard it as something to be disapproved of and frowned upon. They do not like the idea of big hotels and people spending lots of money in them. Is the key to this matter to be found in the Queen's Speech of last November? Is it to be found in the Government's proposals to extend the trading activities of the nationalised industries? Are we to have fewer independently-owned and privately-operated hotels and more State-run hostels? Is this the Government's aim and objective? If so, let them spell it out.
Right hon. and hon. Members opposite should pay much more serious attention to the representations of the tourist industry. I ask the Minister of State, who is to wind up the debate, to tell the House something of what took place between the representatives of the industry and the President of the Board of Trade. What answer did the President of the Board of Trade give to the representations of the hotel and tourist industry, and what steps will the Government take to make good the omission from the White Paper on investment incentives to ensure that the hotel and tourist industry is stimulated towards modernisation and to improve the service to its customers so that it can be placed in an even better position than

it is to assist the country in solving its balance of payments problem?
Turning to the second White Paper announcing the intention of the Government to set up the Industrial Organisation Corporation, I have straight away, as I have on previous occasions when the subject has been discussed, to declare an interest to the House. For the past three and a half years or so I have been a director of a company dealing with mergers and amalgamations and with nothing else. Over that time, I have come to recognise the need for mergers and amalgamations and, more than that, the need for companies such as the one in which I am particularly engaged.
For obvious reasons, I do not wish to indulge in any form of special pleading at all, but in any one year my company investigates several hundred merger situations, which gives it some insight into the requirements of purchasing and acquiring companies and also into the attitude of mind both of those who are seeking to acquire and those who are being acquired or resisting acquisition.
I will not further describe the activities of my own company, except to say that the definition of our operations can be found on page 2 of the White Paper where, in paragraph 5, it says:
…there is no organisation whose special function is to search for opportunities to promote rationalisation schemes which could yield substantial benefits to the national economy.
I will content myself with saying that I know of at least one such organisation in this country—and there are more of them—which exists for that specific purpose. It does not solely act on the instructions of its clients. It seeks out special situations which it believes will assist national requirements as well as the individual needs of the companies concerned.
Therefore, we have become increasingly aware of the need for mergers, and it appears that there is far too great a fragmentation in British industry generally. There are too many small companies, and it has not yet penetrated many of them that perhaps the best way to grow from small to medium size or even to secure their positions whilst still retaining the smallness in dimensions, and, therefore, some degree of personalised participation in the operations of their own companies, is by joining with other organisations.
I very much welcome the change in official attitudes generally towards the need for mergers and amalgamations which has come about in the last few years. I well remember, as no doubt will many other hon. Members, debates in the past when the atmosphere was quite different from what it is today and when the mere mention of the word "merger" was immediately greeted with hoots and howls, mainly from the Labour benches, of "Take-over bid". Indeed, the right hon. Gentleman the First Secretary still talks about the "take-over boys" in damaging terms. He also spoke about holding companies in rather critical terms, and I shall say a word about them in a moment.
What one must welcome particularly is the change in attitude which has taken place and which now recognises the contribution which can come about as a result of the broadening of the base of our company structure. Many mergers have been taking place in the past few years, and almost every day in one's newspaper one finds some kind of merger being discussed. One is glad to note that the financial Press is extremely interested in mergers of all types. There are large numbers of them going on every year, and they are increasing steadily. But I will agree with the second paragraph of the White Paper where it says:
the pace and scale of change do not yet match the needs of the national economy.
Before we can find the solution, or promote the remedy for it, if we agree with the proposition that the pace and scale of change do not match the requirements of the economy, it must be explained why that is so. There are a number of reasons, some of which have been touched upon. It is not that people engaged in manufacturing industry are villains deliberately trying to keep things small. We are not necessarily more stupid in this country than people in the United States of America. I think very much the reverse. We have a natural talent which we have been putting to remarkably good use. With our limited resources, we have nevertheless got a very substantial gross national product which has largely come about from the application of our own ingenuity, talents and skills. We are an adventurous nation. We are an outward-looking race, and it

is wrong for us to get ourselves into the habit of self-denigration to the point where we believe that the failure to match the requirements with the pace of change is due to any inbuilt weaknesses in our characters.
It has occurred for largely historical reasons. Our company structure has grown up largely as a result of individual family operations, and the family operations are inevitably personalised to a high degree to the members of the family. When the members of the family die off, the company either goes out of existence or it is bought up and salvaged. That has been the pattern in the past. Gradually, that is giving way to new methods, and the families themselves are trying increasingly to secure the future of their own companies and therefore the security of those who have worked in those companies by joining them with others of the same type.
Another reason why it has been a slow development in this country is because there are many people who are unaware of the opportunities that they can give to their own companies' activities by broadening the scales of their operations.
What all of us in the House must be concerned to see is that any mergers which take place, or any mergers which are encouraged, by whatever type of organisation or corporation they are encouraged, lead to a greater employment of the capital invested. That has been part of the difficulty with which we are now confronted. There are far too many companies whose assets are being left undeveloped, the managements of which do not appear to realise the vast potential on which they are sitting. Many who do realise it do not, regrettably, wish to move very far or fast because they are much more secure and cosy where they are at the moment. The reason for it is quite clear. The higher the level of taxation, the less will there be any incentive at all for people to lift themselves out of a cosy limited situation or circumstance in which they now find themselves and probe into new situations. Right hon. and hon. Gentlemen opposite must recognise that fact.
The other point that I would make about the criteria on which we should judge these proposals is that the mergers should have some clear chance of leading to a more profitable operation, so that


we shall have some reasonable security and return on the capital invested.
The Government have proposed the Industrial Reorganisation Corporation with the big claim in paragraph 5 of the White Paper that it will fill a gap. The new Corporation is to initiate and sponsor desirable regroupings, particularly where opportunities have been missed. Is there a gap to be filled? If there is, what is the nature of it? Is it a financial gap? From the little that we learned from the First Secretary, that would not appear to be the case. It cannot be a financial gap, because, where the proposals are sound, there is no difficulty now in financing them. If the merger proposals are sound, the money is available from existing institutions.
There is a gap—and here I agree with the hon. Member for Manchester, Cheetham (Mr. Harold Lever)—where the situation is aggravated or complicated by certain circumstances where there is a need—as there is in one industry well known to me—to bring together into two or three larger groupings the many smaller units into which the industry is now subdivided. But many of the smaller units are not very successful trading concerns, and the amount of money needed to be invested over a long period, with little prospect of any immediate return, is such that it is not easy to get the money in the normal course of market operations, and I think that here there is a gap.
But that is a financial gap—and I want to emphasise this—which could perhaps be met, as has been suggested by the right hon. Gentleman the Leader of the Liberal Party, by extending some of the existing institutions such as F.C.I. and I.C.F.C. If it is a question of providing money on reasonable terms to cover a long-term situation which is complex and difficult, why not use these existing institutions? Why not extend their powers and their operations to cover this requirement? If this is the gap to be filled, why is it necessary to create a new institution, the I.R.C.?
If it is not just to provide money, what is the purpose of the I.R.C.? The answer appears to have been touched on by the First Secretary this afternoon. He said that its purpose is to initiate merger schemes and to seek out situations. Apparently this is what the I.R.C. will

do. How will it do it? What staff will it have to assist it? What facilities will it have at its disposal to enable it to seek out these special situations? How will it find the situations which will lead to the sort of merger schemes which it, and it alone, should initiate, and which cannot be initiated by any of the existing institutions?
Incidentally, what will be the administrative cost of this machine? I thought that the First Secretary did not approve of questions being asked of him on this point. He did not seem to like the critical nature of my right hon. Friend's opening speech. But the right hon. Gentleman has only himself to blame, for he has brought in a White Paper which is so vague and generalised in its terms that one is bound to require much more information before being able to accept it. This is one reason why I shall vote against these proposals. I do not think that we have enough information about what the Government have in mind, and what their intentions really are.
How will the I.R.C. go about getting the information which it must have? What information will it demand from companies? Or will it wait for the passing of the Companies Act before it can do this? I emphasise these points, because, as the hon. Member for Cheetham, and others, know, successful mergers are not merely a question of marrying balance sheets. The success of a merger, perhaps after long and protracted negotiations, depends on bringing together not only the products of the two companies but the personalities engaged in the firms. The latter is the more difficult of the two, and requires the greatest amount of tact and sensitivity to bring about. Is this where the I.R.C., a publicly-financed institution, will be best suited to help? If it is, I should like to hear more about how the Government think it will be able to achieve this.

Mr. Harold Lever: Cannot the hon. Gentleman envisage a situation—one among many—where a merchant bank is acting for one party to a proposed merger, and another merchant bank is acting for the other party to it, and they come together with the I.R.C. to organise and arrange the financing of the


merger, in which case the I.R.C. could play a constructive and impartial rôle as between the parties to the proposed merger?

Sir J. Eden: I can envisage such a situation, but that is not the rô1e which the right hon. Gentleman has in mind for the I.R.C. If it is going to be a sort of honest broker between parties who have come together and have agreed in principle that a merger is desirable, that is another situation, but nothing in what the right hon. Gentleman said, or in the White Paper itself, indicates that that is the purpose of the I.R.C. It will initiate merger schemes. In some curious way, which is not known to me or to other hon. Members, or even to the hon. Member for Cheetham, the I.R.C. is going to bring together parties who have not themselves thought a merger to be desirable. If this is so, I should like to hear more about it, and to know more about how the I.R.C. will operate.
The right hon. Gentleman made it clear that the I.R.C. will have no compulsory powers. I welcome that, but what worries me is how the Corporation will achieve its objectives. What will happen if a company chairman says, "No thanks, we do not agree with you. I do not get on with so-and-so, and I am not going to accept your proposals?" I think that the right hon. Gentleman should recognise that we are justified in having a considerable amount of suspicion when he says that this is all going to be done on a voluntary basis, and that no compulsory powers will be given to the Corporation.
The right hon. Gentleman must realise that he said much the same sort of thing about the incomes policy, and we are beginning to wonder when the element of compulsion will be introduced there. We on these benches are therefore justified in wondering when his "dynamic ginger group", as he called it, will become a compulsory element in the economy of this country.
If the I.R.C. is not to be a holding company, which is what the right hon. Gentleman said, why is it necessary for it to have a share in the equity of the companies which it helps to finance? What is the need for this? Is not there some other way of bringing this about? Is it not possible instead to have some

form of redeemable preference stock? Why is the I.R.C. requiring power to purchase the equity of a company?
If the Government have chosen the I.R.I. as their model for the I.R.C., perhaps I might point out that the I.R.I., which is a holding company in Italy, does one useful thing: it successfully insulates business activities from the predatory and inquisitorial activities of politicians and the Government. I do not believe that the I.R.C. will do this, and thus it will differ from the I.R.I. The I.R.C. is not to be a holding company, yet it is to have the power to hold equity shares, and it is not to be a body wholly independent from the Government machine.
Over what period will the equity holding be required? Will the Minister make it quite clear that a provision will be written into the Bill imposing a limitation both upon the extent of the holding in any one company and on the length of time by which the holding will take place? Will there be some reference to the criteria which will have to be satisfied before the I.R.C. will divest itself of its holding? These limitations must be written into the Bill.
To what extent, if at all, will the I.R.C. be answerable to Parliament? Will it be answerable only through the right hon. Gentleman's Department? Do I understand that there is no direct relationship between the Board of Trade and the I.R.C.? It seems curious if this is so, because the I.R.C. will apparently have power to circumvent the investigations of the Monopolies Commission although the President of the Board of Trade is anxious to submit to the Monopolies Commission those merger situations which it regards as suspect in terms of the national interest.

Mr. George Brown: I have already announced to the House that Ministerial responsibility will be accepted by the Department of Economic Affairs, as the Government are now organised, for reasons which seem to us to be better. A number of other departmental interests are concerned, and not merely the Board of Trade.
On the question of mergers, the same rules will apply. The Board of Trade will be responsible for deciding whether or not mergers should be referred to the


Commission. This will apply in the case of any proposals put forward by this body, as it applies at the moment. Obviously, however, in practice Ministers will discuss these points before that stage is reached.

Sir J. Eden: Will the right hon. Gentleman say what is the limitation, if any—

Mr. Speaker: Order. I hope that the hon. Member will not invite another intervention. Many hon. Members wish to speak in the debate, and interventions prolong speeches.

Sir J. Eden: I am sorry, Mr. Speaker. I will not invite the right hon. Gentleman to intervene again. I conclude by emphasising that the general approach to this question is obviously one with which hon. Members on this side of the House have a great deal of sympathy, but a degree of suspicion on our part arises from the fact that the present Government are bringing forward these proposals. This suspicion is fully justified by their past actions and by the manner in which they have appeared deliberately to go out of their way to make life more complex and more difficult for business. If they had manifested less hostility to business, less hostility would be manifested from these benches towards any proposals emanating from them which give them increasing power of direction over every facet of our industrial and commercial life.

Mr. Speaker: Many hon. Members wish to speak. I hope that those who are fortunate enough to catch my eye will remember their colleagues who will be trying to catch it later.

6.43 p.m.

Dr. Jeremy Bray: The hon. Member for Bournemouth, West (Sir J. Eden) seems to be participating in a general bursting out of moderation all over, rather like the giant panda in the London Zoo which, although it has ideological objections to the panda in Moscow, has recognised that some sort of modus vivendi is necessary if its race is to survive. I do not know whether the hon. Member has read the Motion. He tells us that he will tonight vote to decline to accept the White Paper on the Industrial Reorganisation Corporation. When he was speaking, it sounded to me as though he wanted to

know more about the I.R.C., finding it a rather fascinating proposal. I agree that there are many industries to which it should devote its attention. The White Paper lists some of the considerations—scale, research, modern equipment, marketing organisation, inadequacies of management, and so on. But we all know the kind of company involved and what it looks like on the ground.
It is not intrinsically bad. Possibly it is doing quite well, both at home and in export markets. But it simply does not have a profit margin which will enable it to modernise, invest, acquire management, services and afford the overheads. In its present scale of business, and its uncertainty of business—which is more important—it cannot undertake these things. Everybody has been hesitant to name companies, but a good example is to be found in the chemical plant manufacturing industry. In it we have a number of firms which are not bad. They are in the capital range between £20 million and £50 million, but none is able to maintain a steady volume of work in order to afford management services, modern design methods and stockholding, or the size of order books which are necessary to compete with overseas chemical plant manufacturers, on the scale on which they are operating.
I would be delighted to fight the next election on the suggestion that the first attentions of the I.R.C. should be directed to bringing together some of the worthwhile firms in my part of the country which, I am sure, would gain immensely in strength by being brought together. I hope that the operations of the I.R.C. will not be secret. I do not see how they can be. There has been a suggestion that if we start buying up shares in private we can possibly get them more cheaply before takeover rumours start spreading. On the other hand, the advantages of the emergence of the proposals on the lines suggested in the White Paper—through the E.D.C.'s and suggestions from industry, the City and Government Departments, inevitably presuppose an openness of discussion in which I hope the House will feel able to partake in urging on the attentions of the I.R.C. certain parts of industry with which individual members are familiar.
I particularly welcome the statement that the I.R.C. will pay special attention to management needs of new groupings. The hon. Member for Bournemouth, West mentioned this. I am sure that to regard the work of the I.R.C. as merely a financial operation would be a gross mistake. In its attention to management needs the general approach of the I.R.C. is immensely important. It should appear as a streamlined, efficient, humane body in its handling both of employees of companies in which it is operating and also of the directors.
A code of practice is needed in relation to the protection of employees, covering redundancy schemes, and paying attention to the needs of employment in the areas in which the I.R.C. is operating, together with the contribution which the proposed company reorganisation can make to the desired pattern of industrial development elsewhere in the country.
I am sure that the right hon. Member for Orkney and Shetland (Mr. Grimond) carried the House with him in emphasising the responsibility of the I.R.C. in connection with the regional development pattern. But in its humanity the I.R.C. should not be reluctant to push people off boards if it feels it is necessary. It should not be vindictive, but it should certainly be firm. I hope that the I.R.C. will create a new mobility in management, opening up the prospect for far more professional management people to acquire a higher level of responsibilities; and also for management and individuals from abroad to be brought into British industry. There is a great deal which we can learn from many American companies. I have not the least objection to American participation in particular parts of industry which they know well and where they can assist the transition to a higher state of technology and company organisation, at least over a period of years and possibly under management contracts.
Among these sources from which management is to be brought together, I hope that the Civil Service will not be forgotten. The right hon. Member for Orkney and Shetland had a very good point in deploring the proliferation of committees and the dividing up of responsibilities of government and possibly a certain shuffling off. The First Secretary gave some reassurance

assurance here when he mentioned that, before any substantial merger took place under the ministrations of the I.R.C., Ministers would have discussed the matter and, therefore, the matter would have been considered within the departmental machines. This is excellent.
One asks, why have a corporation at all? Why not have this as a section of a Government department? This is not a bureaucratic problem, because there would have to be a separate organisation anyway, but the question is whether it should be within or outside a Government Department. We here come against the code of practice for British public life, that, the moment anyone has to exercise any discretion, this cannot be exercised within a Government Department. There people either spend their time making the rules or following them, but people who are actually given considerable freedom to act without the guidance of rules and to follow a rather broadly defined path have to act under a cloak of at least a quasi-independent corporation. I hope that we shall get away from this concept, but this is a wider development of Government and, meanwhile, we are inevitably faced with the position of a semi-independent corporation.
This brings me to the investment incentives, where this becomes a major factor. I could not possibly dissent in any respect from the general considerations put by the First Secretary—the need to stimulate investment, the inadequacy of investment, the lack of purposeful direction of that investment in our economy are well substantiated. But I think that we would be foolish on this side of the House to disguise from ourselves too much the point which will, I am sure, be pressed on the other side of the House—when the Bill goes into Committee—that there is a substantial effect on the cash return to a company considering an investment project under the new incentives as compared with the old.
I will not burden the House with detailed comparisons, but I have here four pages of comparisons which a company accountant was good enough to draw up for me on a full discounted cash flow basis. Once again, I am sorry to note that we have had no mention of this kind of assessment from either Front


Bench, but I trust that we shall do better when we are further on with these considerations, and I am delighted to hear the Board of Trade holding out hopes on this matter.
On discrimination between—

Mr. Eric Lubbock: Would it not have been helpful if we had had a comparison on a discounted cash flow basis in the White Paper itself?

Dr. Bray: I would agree with that entirely, but for one consideration which has been made earlier, about the fiendish complexity of assessments in this respect. Any comparisons in this regard are complex and confused, because what we are doing is comparing the old system, which was a confused and complex one, with what is—I am sure hon. Members will agree in principle—a simpler system. To compare a complex with a simple system is inevitably a complicated matter. I would prefer to get over this procedural difficulty by the House being able to consider this question in a Select Committee where we could interrogate experts from the Inland Revenue and the Treasury, and from private sources as well, so that we could fully consider the matter.

Mr. Patrick Jenkin: Has the hon. Member carried out the calculation of the example project given in the investment appraisal document prepared by the N.E.D.C. on both the old and the new bases? If he has, would he not agree that that project shows, using the most sophisticated D.C.F. methods, the advantage to the firm concerned is substantially less on the new basis?

Dr. Bray: I would not dissent from that, and it is an interesting comparison to make; my comparisons, I am afraid, are on a different basis.
I would freely accept that the cash return to the firm in deciding whether or not it undertakes a new investment project is less under the present scheme than it was under the rates as they stood in 1964, but I would add, "so what?". Here the evaluation depends on the direction on which we are seeking to move. My first question in this respect is, why discriminate between capital and operating? With the far faster depreciation rates which one has to use in industry today, with increased obsolescence and the

uncertain life of products, the distinction is becoming increasingly artificial.
I spent the greater part of my industrial life 60 per cent. operating and 40 per cent. capital, like a previous Member of this House, who was part mortal and part fairy. The lunches which were sometimes given to trade union officials were treated as operating expenses, although the lunches to journalists were treated as capital expenses.
I believe that all this is fully appreciated and understood by the operating management of industry today which finds the greatest difficulty in making these distinctions. The distinctions have to be made, however, for accounting and tax purposes. Therefore, it was only natural, in my view, for the C.B.I. to plump for free depreciation as the only reasonable basis, in the long term, for assessing capital allowances and incentives and so on. But this was an utterly unrealistic choice for the C.B.I. to offer its members without posing the question, "How would you manage the transition? How would you manage the year or two when you were not collecting any company taxation at all because future investment allowances were wiping out taxable income?" The only way in which you can manage it is to increase the basic rates of tax in the transitional years, while moving over to free depreciation basis.
I would like to hear hon. Members opposite say whether they accept the desirability of increasing the basic rates of tax in order to move to this, perhaps, ultimately desirable state. I would be ready to see a higher rate of tax for the transition to make this move possible. However, taking a realistic view of the position today, one knows that we shall have to work with diminished investment incentives of the type which we have now, which I do not see as a permanent feature, but moving on in due course to operating on a free depreciation basis.
I would hope to see developments in the selectivity of the investment incentives. I do not dissent from the initial selection made of plant and machinery in manufacturing industry. The points which the hon. Member for Bornemouth, West made about the tourist industry are understandable, as are the points of those who have spoken about the service


industries and transport. But we are faced with the inescapable problem of the balance of payments, and we must operate as close as we can get to the balance of payments, which is overwhelmingly a matter of operating on the efficiency of manufacturing industry in the short term.
I hope that these points about the necessity for efficiency and for proper investment over the whole range of economic activity will be granted and provided for in the long run, but I hope that the actual cash investment incentives will become more precise and, therefore, lighter in their total volume and more sharply angled at the points where they are most needed, making possible a reduction in the total cost of the scheme.
To be selective at all we need a new machine—an increase in the bureaucracy, to put it one way—with the one thousand or more civil servants about whom the right hon. Member for Altrincham and Sale (Mr. Barber) spoke. But to be selective on a crude division is about as difficult as being selective on a finer division. Once we have the machinery to be selective on this relatively crude division I hope it will not be long before this, in turn, will develop to selectivity on a finer basis.
One possible criterion which we might have had was that which I have understood from the Press the Ministry of Technology was interested in; encouraging the use of advance designs of machine tools and engineering equipment generally. Let us by all means have some of this type of selectivity introduced, but I sense that we are, at least in part, frustrated from moving in this direction because we are operating Government policy on the two levels about which I have spoken—the rule-makers in the Treasury, Board of Trade and elsewhere, on the one hand, and the rule appliers, the thousand or more civil servants who deal with the operations of firms, on the other. If we could blur this distinction and introduce a finer criterion to operate by, I am sure that the system would be practicable in administrative terms.
If we had this move towards almost dismantling the system of investment allowances and moving towards a system of free depreciation, by becoming more

highly selective—more discretionary in the operation of the rules by civil servants—we could take a certain attitude to the measures which are now before us and there may be directions in which they could be modified in the legislation which is to come before the House.
I will give an example concerning the treatment of computers. There has been a great deal of interest in the suggestions for the encouragement of technologically advanced methods in industry. It seems strange therefore that a computer which is used for production planning in a development district carries only a 20 per cent. investment grant whereas an ordinary run of the mill machine tool carries a 40 per cent. grant in the same workshop. I should have thought that to increase the investment grant on computers from 20 per cent. to say 40 per cent. would begin to have some effect on the readiness with which firms would use computers and that it would at the same time remove what seems to me to be an unfortunate disincentive to use computers in the areas where we hope industrial development and modernisation will go ahead at the fastest rate.

7.3 p.m.

Mr. Geoffrey Hirst: I trust that my hon. Friend the Member for Bournemouth, West (Sir J. Eden) will forgive me if I subscribe to the proposition that no speech from the back benches should, in any circumstances, occupy more than 15 minutes of the time of the House. I intend to abide by that proposition. When the hon. Gentleman the Member for Manchester, Cheetham (Mr. Harold Lever) achieves that, with time to spare, no hon. Member need be ashamed of such an endeavour.
I regret that the right hon. Gentleman the First Secretary is not in his place, because I have certain things to tell him. He was with us earlier, and I recall that when we were debating the last Finance Bill I complained that he did not spend sufficient time in the Chamber. After his speech today, I will not again grumble about his absence. However, I would have liked him to have been here to listen to my remarks, because I must take him severely to task.
As my right hon. Friend the Member for Altrincham and Sale (Mr. Barber)


made abundantly clear, it is a fact, without a shadow of a doubt, that the First Secretary used extracts from speeches made by the Director-General of the C.B.I. purposely and intentionally to support the right hon. Gentleman's argument that the White Papers before us were documents he supported—although the right hon. Gentleman had not taken the trouble to check his facts.
I do not think that this is a disclosure to the House, but for between 25 and 30 years I was a member of various regional councils, economic committees and other bodies of the F.B.I. I am still a member of a committee of the C.B.I. and I therefore know something of what C.B.I. thinks on this subject. I am not, however, in a position to announce precisely the view which the C.B.I. takes on this issue, remembering that its findings have not yet been published. But I can say with considerable authority—because I am on the Economic Policy Committee of the C.B.I.—that the First Secretary had no grounds whatever for making the statements he did. Had the right hon. Gentleman bothered to check his facts—and considering the position he holds it would have been decidedly prudent of him to have checked them—he would have seen that he should not have used such a dirty trick—[Interruption.]—to support the statements he made. The right hon. Gentleman is not here, but it is well known in the House that I am always prepared to say to a man's face what I say in his absence.
I recall the Finance Bill debates we had last year and the remarks of the right hon. Gentleman the Chancellor of the Exchequer. It is interesting to note that in April the right hon. Gentleman said:
It is, of course, true as a piece of arithmetic that the lowering of the rate of any tax does in the one sense reduce the value of any relief given from that tax."—[OFFICIAL REPORT, 6th April, 1965, Vol. 710, c. 256–7.]
I sometimes wonder what the business people generally now think about that statement of the right hon. Gentleman. Not only is it not a matter of arithmetic, but the right hon. Gentleman has not given any relief at all to many quarters of industry. It would have been reasonable for him to have said at the time that he had certain ideas in mind—that is, if he had the slightest idea of what he would do later on. Half the trouble with

the present Government is that they do not know what they will do next.
I followed the thoughtful speech of the hon. Member for Middlesbrough, West (Dr. Bray), although I did not agree with all of it. One of the great troubles about his argument concerning the amount of taxation needed in order to switch to a free depreciation basis is that the Government, because of their foolishness in this and other matters, have left themselves absolutely no room in which to operate. They have imposed rollicking taxes worth hundreds of millions of £s and they have left themselves no room to take other action. They have not taken note of the basic needs of industry, and these shocking White Papers do not deal with those needs.
No Member of the Government seems to appreciate what this subject is all about. They cannot explain how their new proposals will work, and nobody really believes that this is in any way a scheme for giving investment incentives. It is grossly inefficient to produce a document which will benefit firms irrespective of whether they make a profit or a loss. The Government have not begun to think in terms of what a free enterprise system means. Many years ago the late Aneurin Bevan said to me, when I was criticising his party, "You know, Geoffrey, you must appreciate just what is wrong with my party. They only believe in half-way Socialism. You must either have full-blooded Socialism or a private enterprise system. I support one, you support the other, but my party supports neither". That is roughly where the party opposite stands today.
I apologise to hon. Members for speaking quickly, but I intend to keep my promise to take 15 minutes at the most to make my contribution.
Consider the way the Government are divorcing the company from its shareholders. I recall complaining about that during an earlier financial debate. First, profits are favoured over dividends, and now investments are favoured over profits. The only redeeming feature—although it cannot be called even that—is the promise that the Government will speed up the giving of investment incentives. I can only forecast my strong conviction that we will have a fresh horde of civil servants and a monumental waste in


Whitehall as well as in industry. I regret to say that this will be a ghastly waste of everyone's time. Are hon. Gentlemen opposite not aware that delay by itself depreciates the value of what is pushed out in the form of incentives?
This whole exercise shows that not for the first time the Government will not learn by their mistakes. Should they not have learned by now? They must realise that a planner's paradise can be something like hell on earth if the Government constantly make mistakes in the name of assisting industry. I am not convinced that the element of discrimination between development and other areas, on the one hand, and other sections of business, on the other, makes any sense at all. It certainly does not fit into any consultations with which I have been involved, and I cannot believe that the consultations which do take place—and I have heard a lot of them—are in the least satisfactory.
I cannot help observing that the trades and services which make the biggest demands on manpower—remembering that manpower is our scarcest asset—are completely left out of the Government's new ideas. Those are the very concerns which should be encouraged to install labour-saving machinery, yet they are the concerns which are excluded. Equally, it appears unwise to discourage the existing trend to mechanisation in the construction industry.
My hon. Friend the Member for Bournemouth, West has drawn attention to the utter stupidity of giving no incentive at all to the hotel, catering and tourist industries, industries which have a remarkable degree of growth in earning foreign convertible currency. It is just as we forecast in the Finance Bill debates—the Government have swallowed the planners' delight without measuring the consequences. They embarked in the Budget on disturbing taxation changes, and they are now drawn into dubious methods of getting out of the consequences of their former folly.
The other White Paper deals with the Industrial Reorganisation Corporation. I have had just a little experience in this field, as for some years I was director of a house that dealt in a modest way with amalgamations. I have also recently taken some trouble to consult other people,

and their experience has been the same as mine, which is, broadly speaking, that at no time—unless the Government put on a credit squeeze—can we think of an instance where a worth-while merger or amalgamation cannot take place because of lack of money. The ordinary market can provide the money.
If the argument is that the Government are putting on a squeeze, where is the sense of their economic policy if they are to dole out money on Treasury bills—manufactured currency—because the markets cannot do it? If that is the idea, it does not make sense either. It all smacks of some degree of intention of gradually getting control of a greater part of private industry.
I do not think that the agency's work will go as far as the Government make out. The market firms concerned go out round the country. When I was in the northern office in Manchester it was my job to contact people in the business world to see whether they would enter into various arrangements. The idea in the White Paper that the merchant banker sits in his office smoking his pipe and waiting for people to come to him to make a merger is nonsense. He must use every reasonable means to try to find out businesses that want to amalgamate.
The agency work should be separated from the provision of finance. Whenever possible, the market should be used in preference to this organisation. That has been slightly promised, and I see no reason why it should not always be the case. If Treasury funds are used, it must be at the full interest rates. We have heard that there will be no compulsion, but will there be no pressure, no Government use of buying power and talking over of the type that has gone on before? I refer to the sort of framework in which the F.B.I. got tied up with the declaration of intention. That paper was not available for all to see; it had to be handed back after being signed in front of the Press. And industry is now finding itself being obligated in ways never imagined.
We have not had an assurance that this £150 million will be the ceiling. Does anyone here imagine that we shall sit comfortably by and accept Government assurances? If there is to be another £150 million, bang go the Government assurances that they are not trying to creep in and gradually control private industry.


No one will wear that for a minute in this House, so we must have strong assurances, because I want to be as practicable as possible in order to save what can be saved from the confusion and muddle.
I hope that industry will see that in this case its best advantage is to try to avoid having to deal with this organisation and, instead, discover organisations in the City that can do this sort of thing in the ordinary way, using market value and money that already exists. Then we shall not be faced with this dangerous game with this organisation, with perhaps the likelihood of its printing Treasury money to cover its, manifestations.

7.15 p.m.

Mr. Edmund Dell: To anyone who wishes to get the economy moving and developing rather faster, it is very depressing when hon. Members opposite who claim to have influence in the affairs of the C.B.I. make the sort of speech we have just heard from the hon. Member for Shipley (Mr. Hirst), which is nothing but another call to industry not to co-operate with the Government in managing the country's affairs. It is certainly true that, whatever Government may be in power, if there is to be no such co-operation we shall all suffer. The hon. Gentleman's attitude now, and on previous occasions, can only be disastrous for the country's economic future, and I only hope that the C.B.I. will pay as little attention to his speech as I am sure the Government will.
One of the most important questions we have to ask about the country's economy is: why is investment so low? The right hon. Member for Orkney and Shetland (Mr. Grimond) gave figures illustrating how low our investment is relative to the situation in other countries. For many years now we have had a system of investment incentives—introduced very largely under the previous Administration—as good as any that has existed anywhere in Europe, yet the increase in the percentage of the gross national product going to investment has been very small.
We must seek the reasons for this, if they can be discovered, and see how far the Government's proposals meet the requirements of the situation. Unfortunately, the reasons for the low rate of

investment are not well understood. I suggest that there are three reasons. They may not, in fact, be reasons but symptoms, but to me they appear to be reasons, and I want to consider how far the Government's proposals in the two White Papers go to meet the problem.
The first reason that emerges again and again in conversations with industrialists is the continual economic stop-go, the lack of confidence in future development, the lack of certainty of being able to sell all one produces if one does invest. All this is tied up with the balance of payments. Many economists write this argument down, but I think that it is a substantial factor in the minds of many industrialists considering investment projects.
Here the Industrial Reorganisation Corporation and the proposed system of investment grants are likely to assist in regard to what is the basis of the stop-go problem—the unsatisfactory state of the balance of payments. Investment for export has a higher element of risk than investment devoted to supplying, consumption in this country. I think the system of investment grants by increasing the profitability of an investment will make a contribution—a small, but significant and important one.
The second reason for the low rate of investment in this country was suggested recently by Professor Bruce Williams of Manchester University in the C.B.I. magazine British Industry as being a scarcity of investment proposals. During investigations that he and Professor Carter had carried out in British industry they had found this scarcity of ideas for new investment.
Here, I think, there are two requirements: first, additional scientific research by those companies that do not now sufficiently engage in it, and, secondly—and very much more important—far more market research, especially market research relating to overseas markets; market research abroad. Then we could have far more export-orientated or export-induced investment. This is primarily a management question, not a question with which I think the two White Papers will assist. Here one is confronted with the whole quality of British management.
The third reason which seems to be seriously affecting the level of investment


in this country is a fear of risk-taking among British industrialists, a fear of risk-taking particularly in relation to exports and a fear of making the sort of investments which will produce exports and which rely for their profitability on exports. Here the proposals in the two White Papers will assist. I think a system of grants directed to manufacturing industry will assist because the risk of any export-orientated investment will be smaller and the investment which is proposed will appear more worthwhile in itself.
The proposal of the Industrial Reorganisation Corporation is important in this respect because, as my hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) suggested, nothing is more important for promoting the development of exports by this country than increasing the size of the industrial organisations engaging in exports. Exports are undoubtedly assisted by having large companies which are capable of running proper overseas organisations to sell their products.
In these ways these two proposals the Government are making are directed to the important question of why the investment level in this country continues to be so low despite the investment incentive system we have had in the past. I must confess that I do not believe that the effect will be dramatic, but, nevertheless, I certainly think that in so far as proposals of this sort can make a contribution to this problem these will do so.
I wish to refer to certain of the remarks made by the right hon. Member for Altrincham and Sale (Mr. Barber) when attacking the proposals which the Government have brought forward. He referred to start with to the C.B.I. review and posed a suggestion that British industrialists were against the proposals regarding investment grants which the Government have brought forward. I think the review which the C.B.I. did is interesting, but I interpret it as leading to conclusions directly opposed to those which the right hon. Member suggested.
First, more than 50 per cent. of those approached did not answer the inquiry. It is a pity that one has to learn that fact from the Press because it is not

included in the documents which the C.B.I. published on the review. Secondly, leaving aside the proposal of free depreciation—which is accepted I believe by the C.B.I. as impracticable at the moment—the real conclusion on this matter is given on page 8 of the document, where it says:
On this basis of a single transferable vote…"—
that is, among the less than 50 per cent. of those who did reply—
a straight choice between the existing system and a 15 per cent. cash grant would leave the former In first place with 53 per cent. of the respondents' votes against 47 per cent. in favour of a cash grant
In fact they are comparing the existing system as against a 15 per cent. cash grant, when what we have is a 20 per cent., and in development areas 40 per cent. Who can possibly say on the basis of this report that British industry is against these proposals, especially taking into account the fact that more than 50 per cent. of those approached did not reply and that it is those who were approached and did not reply who are among the most important people with whom we are trying to deal?

Mr. Barber: Although I do not challenge what the hon. Member said, perhaps he will take account of the fact that it is stated under the heading of "coverage" that the respondents accounted for close on 50 per cent. of gross fixed investment in manufacturing industry in the United Kingdom over the period 1956–1964. This is of real significance. I do not want to intervene for too long, but I wonder if the hon. Member will read out the next four following lines from the passage he read? I am not suggesting that he deliberately did not go on with the quotation, but I think it relevant to what he was saying.

Mr. Dell: I agree that those lines are certainly relevant to what I was saying. I accept the fact that the coverage of this document represents, as the C.B.I. says, 50 per cent. of gross fixed investment. The point is that more than 50 per cent. did not reply and among those who did reply the margin in favour of the existing system was very small compared with those in favour of the 15 per cent. grant. In regard to the four lines to which the right hon. Member referred, the figures


on which that conclusion is based are not given.
We have the 53 per cent. against 47 per cent. and the fact is that we are talking about a 20 per cent. grant and 40 per cent. grant in development areas, not 15 per cent. It is extremely questionable whether on the basis of these figures one can come to the conclusion that British industry is against these proposals. I would guess that now they know a great deal more about what the Government propose they will favour the proposals rather more strongly than right hon. Members opposite have suggested.

Mr. Peter Emery: I am sorry to interrupt the hon. Member but this is a very relevant point and I am certain that he would not want to mislead the House. The points which the hon. Member says have a bearing are in my view terribly relevant, because the document says:
Respondents whose investment decisions are sensitive to investment appraisal—and these are growing in number with increasing sophistication of investment appraisal—show a strong preference for the existing system of capital allowances over the three systems of incentives.
This is relevant. While I accept the figures the hon. Member for Birkenhead (Mr. Dell) has given, I am certain that he would not want to hide that fact.

Mr. Dell: I quite accept that, but the whole point of the new system is that we want to bring within the sphere of investment grant and incentives those firms which are not sensitive to investment appraisal. It is precisely those firms which we want to influence. If the hon. Member for Reading (Mr. Peter Emery) will look at page 3 of the document, he will find that even now only 45 per cent. of large investors use D.C.F.-type calculations even for very large expansion items—in other words, 55 per cent. do not. It also says on the third page that only 34 per cent. use it for replacement items, so 66 per cent. do not. What the hon. Member said confirms what I said.
The right hon. Member for Altrincham and Sale dealt with the principles involved and threw a dramatic charge across to the Government by saying that the Government do not believe in the market economy. The right hon. Members

does not believe in the market economy either. Anyone who believes in the market economy would not have a system of investment incentives because a system of investment incentives distorts the market economy for very good reasons of economic planning. The argument which the right hon. Member tried to use in the course of encouraging his own side instead of criticising the proposals of the Government was the sort of argument from which I should have thought this debate does not benefit, unless he is now stating on behalf of the Opposition that the Opposition now accepts the views of the right hon. Member for Wolverhampton, South-West (Mr. Powell).
The right hon. Gentleman accused us of abandoning the profitability test, but the old system of investment incentives also reduces the significance of the profitability test in any proposal for investment that an industrialist is considering. This new proposal does not eliminate the profitability test. Industrialists will still put their money into any investment and will still be very likely to consider whether their money will make a profit. The profitability test remains, and remains to an important extent, but this proposal has the effect of encouraging risk taking, and that is the most important result we can expect from it.
Many criticisms have been made about the regional implications of these proposals. I am very glad to see my hon. Friend the Member for Stockton-on-Tees (Mr. William Rodgers) in his place on the Front Bench, because if there is one field in which the Government have taken beneficial action it is in dealing with the regional problem, as is evidenced, for example, by the fact that unemployment in my own constituency has decreased by nearly one-half since the Labour Government took office.
The trouble is that increasingly and to an unfortunate extent the debate between the Government and certain sections of British industry, fortunately by no means the majority of British industry, is dominated by doctrinaire attitudes on the other side of the House—not on our side. Both the Economist, which is not a paper which has been recently favourable to the Government, and the Financial Times have said that


this proposal of the Industrial Reorganisation Corporation has merit if it is properly administered, yet some hon. Members opposite can see no advantage in it. The Chairman of I.C.I. has made ridiculous doctrinaire statements on the subject. The representative of the C.B.I. has evidently now left the Chamber, but the Confederation in an editorial in its magazine British Industry on 7th January of this year made this quite extraordinary statement, which I think must be a record in doctrinaire statements on this subject:
If private enterprise believes fervently in private enterprise, as indeed it ought, then it should oppose both Plowden and Fairfield as a matter of principle no matter what the circumstances might be.
I emphasise:
No matter what the circumstances might be.
I challenge hon. Members opposite to produce a statement more doctrinaire than that.
The fact of the matter is that, if our economy is to develop faster than has been our experience in the past, there must be co-operation between Government and industry. The C.B.I. in its official statements goes contrary to much new thinking amongst industrialists, who realise, on the basis of experience in this country and elsewhere, the importance of co-operation between government and industry. The Government must be responsible for the central economic direction of the country. I regard these two White Papers as valuable steps in the right direction.

7.33 p.m.

Sir Fitzroy Maclean: I do not propose to follow the hon. Member for Birkenhead (Mr. Dell) into all the intricacies of his very interesting speech. I will just take him up on the question of who is doctrinaire and who is not. Any hon. Gentleman, especially an hon. Gentleman who sits below the Gangway, as he does, should be careful about calling us doctrinaire, because he is a member of a party which has nationalisation for nationalisation's sake written into its constitution.
Much has been made of the simplicity of the Government proposals. The hon. Member for

Middlesbrough, West (Dr. Bray) touched on this. Simplicity is not everything. I was glad that the hon. Member for Middlesbrough, West referred also to selectivity. This is something which the White Paper on Investment Incentives badly lacks. I was glad that my right hon. Friend the Member for Altrincham and Sale (Mr. Barber) pointed out that the new grants are to be paid regardless of profitability. I do not think that anything that the hon. Member for Birkenhead said refuted my right hon. Friend's arguments. There is no doubt that a grant paid as these grants are to be paid does not impose the same check on profitability as a tax remission.
It seems as though we shall pay the price of simplicity. Simplicity is always a very expensive luxury, for people with simple tastes are always those with the most expensive tastes. We shall pay for this alleged simplicity in a plethora of new civil servants.
Another sign of simplicity, I suppose, is the judgment of Solomon which cuts industry in half according to whether it is manufacturing or extractive, on the one hand, or a service industry, on the other. That, as I hope to show, can be very unfair and also very destructive of the alleged purposes of the White Paper.
Speaking as a Scottish Member, I share the dismay of Edinburgh Members, including, I have no doubt, the hon. Member for Edinburgh, Leith (Mr. Hoy), whom I am glad to see in his place on the Front Bench, and of local authorities, for that matter, because they have made their attitude quite clear, at the exclusion of Scotland's capital from the new development areas. We shall be told that the reason for this is full employment; but is it possible to talk about full employment in the Edinburgh area when there is depopulation on the scale that exists in the Borders barely a score of miles away? Is it really logical to spend £6 million of the taxpayers' money on Leith Docks but at the same time to discourage industrial expansion in the area? The Government show signs of reconsidering their attitude towards Europe. If we go into Europe, Leith Docks may be very important indeed as an international port. The Government would do well to bear this consideration in mind.
Another disappointment for Scottish Members, although it is by no means the


only one, will without doubt be the Government's treatment of the tourist industry. All hon. Members on both sides are agreed about the importance of this industry, not only to Scotland, but to the United Kingdom as a whole. I thought that we were all agreed as to the need for bigger and better and more hotels. The tourist industry employs at the moment over 600,000 people. On no less authority than that of the National Plan, we are told that it earned £120 million in foreign currency in 1964 It is one of the country's main earners and main savers of foreign currency. This is quite apart from the innumerable indirect benefits which the industry brings to whatever area it is situated in. The tourist industry is a tremendous consumer of goods of all kinds.
My hon. Friend the Member for Bournemouth, West (Sir J. Eden) said something about 2 million tourists coming to England every year. I do not know how many tourists come to England, but I know that about 5 million come to Scotland. Whether some of them by-pass England on the way or whether 3 million of them escape from England to Scotland I am not sure, but the fact remains that we have so far had in Scotland a flourishing tourist industry and one which deserves to be encouraged.
The tourist industry in other countries, the competitor of British tourism, receives substantial report from Governments in the way of subsidies, grants, tax remissions, cheap credit and so forth. I have long urged successive Governments, not beginning with this one, to do more for British tourism. I should say here that not only do I represent a constituency where tourism is of paramount importance but I own a small hotel, a village inn, and I approach these problems, therefore, from a strictly practical point of view. I cannot say that either under this Government or under the last my representations met with great success.
Far from receiving any special assistance from the Government, the hotel industry is excluded from some of the assistance which the rest of industry has hitherto managed to get. There is no initial investment allowance on hotel buildings, while this is allowed on industrial buildings, in spite of the fact that hotel buildings are far more prone

to obsolescence and to wear and tear than the average factory building.

Mr. Gordon Campbell: Hear, hear.

Sir Fitzroy Maclean: I am encouraged by hearing my hon. Friend's "Hear, hear". I hope that, when he is in office, he will bear the point in mind. I certainly shall.
That was the position hitherto, under the last Government. What have this Government done? First, they disallowed entertainment expenditure. This was one blow to the tourist industry. Second, they imposed building licences on hotels, while proclaiming the need for more hotels, but they did not at the same time impose building licences on factory buildings. Now, the hotel industry is to lose the one piece of assistance which it did have under the last Government. It is to lose the investment allowance on hotel equipment as opposed to buildings.
Being a service industry and having fallen on the wrong side of the judgment of Solomon, the hotel industry will not qualify for the new cash grants. Thus, it is to lose the one little bit of help it was getting, and it is to have nothing in its place. Is this the way to encourage building and the equipment of more hotels? Is it the way to modernise the tourist industry and attract more tourists? I ask the Minister to bear these considerations closely in mind.
I turn now to the effect of the Government's proposal on yet another so-called service industry which, as such, is excluded from the scope of the new grants. Here again, I declare an interest. I speak as President of the Relay Services Association of Great Britain, which represents about 150 companies engaged in providing television and radio reception by wired relay systems. I have already written to the right hon. Gentleman on this subject. Plans for the installation of relay networks and systems of this kind are essentially a long-term proposition. One is investing heavily in something which does not bring any return for a number of years, and, depending on the density of the population served by these systems, it may be as many as four to seven years before a firm even breaks even and has any hope of a reasonable return on capital. Clearly, this involves planning a very


long way ahead. It calls for long-term contracts and long-term capital. It has involved, as hon. Members will understand, the reasonable assumption that there will be no radical or sudden withdrawal of various kinds of tax allowance.
It is for this reason that the White Paper proposal to withdraw investment allowances as from the quite arbitrary date of 17th January has come as such a shock to this particular industry. Taken together with the new Corporation Tax, it has at one blow not only falsified the plans of many relay companies and firms—some of them are quite small firms—for future capital development but it has falsified the whole basis of a lot of existing current contracts which were negotiated on the assumption that existing fiscal inducements would not be suddenly withdrawn. In short, not only has forward estimating been thrown out but, as often as not, the slender margins of profit on past deals will now disappear altogether.
It is quite natural and right that the Government should want to help manufacturing industries, even if they manufacture only bingo cards. But do they want at the same time to penalise—that is what they are doing—service activities such as the two I have mentioned, the hotel industry and the relay services?
I realise that there are some people who do not like either television or radio, but the general public does, on the whole, and they constitute a definite amenity for most people in this country. I cannot believe that anyone who accepts the need for television or radio reception will dispute that the relay companies do a good and useful job. For one thing, they provide improved reception. They provide reception where, otherwise, reception is not available for geographical or other reasons, and they help also to make our towns look better, or, at least, stop looking worse by, to some extent, preventing the proliferation of television masts and aerials. The practical and active interest which has been shown by local authorities all over the country, particularly by the new town corporations, in relay services is strong evidence of the need for such services and of the good work which they do.
There is one more point which perhaps would not occur to everybody but which

is nevertheless relevant. It is worth recording that the relay companies also work in exporting. A number of the larger concerns have obtained contracts for installing systems of this kind overseas.
Surely the Government must accept that hotels are not so much luxuries as necessities and that they play an enormous part in bringing tourists and businessmen to this country. There is a need for a great many more and better hotels than we have at present.
Paragraph 26 of the White Paper on Investment Incentives states that the scheme for investment grants will not in general cover service activities. Perhaps I am being rather optimistic in seeing an indication, in those words "in general", that, when the time comes to draft legislation, the Government may be prepared to show themselves open-minded at any rate towards marginal and hard cases. I hope that, when the time comes, they will bear in mind the points I have made and consider whether they really want to penalise either of these industries and whether they could not make exceptions where called for.

7.52 p.m.

Mr. Peter Shore: As I want to be brief, I hope that the hon. Member for Bute and North Ayrshire (Sir F. Maclean) will not think me discourteous if I do not follow him. I want instead to come to what I consider to be the main point of the debate. The objectives of these two White Papers need to be clearly understood and discussed. As I see it, the purpose is to help rectify what most of us would agree are four major defects in British industry.
One of those defects, obviously, is that we have not invested enough over the years. The second is that the quality of our investment, whether one takes balance of payments criteria or social regional policy criteria, has not been of the kind we want. The third is that the structure of our industry is in need of very considerable change—just how much we do not know, because we have not studied the matter and have not the necessary information. But at least we know that major change is needed, and, of course, to some extent it is going on all the time.
The fourth defect is that we are failing in some ways to develop new activities of industry. We see opportunities


created—many are pioneered to some extent in public research and development corporations—but there is not the follow-through to manufacturing industry. All these are defects in British industry to which these two White Papers are directed, and it is against these needs that we should judge the effectiveness of the White Papers.
First, I want to deal with whether or not the new system will help greatly to increase the level of investment in British industry. I am a sceptic about this, for a number of reasons, not least because I do not think that this is the decisive factor in influencing investment decisions of private industry. Indeed, I am not sure that we know what those decisive factors are. Anyway, I am certain that the best we can do here is to provide adequate incentives.
The right hon. Member for Altrincham and Sale (Mr. Barber) made a tremendous fuss about what he detected as differences in the cash value of the incentives under the new grants system and those under the old investment allowance system of the Conservative Government. But the marginal difference is, I suspect, extremely small. What he did not say and what he should have said was that the Conservative Government only introduced their system in 1963 and that it gave a very violent stimulus to industrial investment at that time.
There had never been anything like such incentives to British industry, certainly not since the war—and it was done deliberately to get industry out of the savage deflation into which it had been plunged by the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) though his measures of 1961. I am sure that the new system will give the incentives that are required and that, whatever the calculations turn out to be, the results will be far better than anything we have had before, at any rate up to 1963.
Secondly, there is the quality of investment. This is fairly obvious. There is to be a 40 per cent. investment grant—double value—to a firm going to an area of high unemployment, into one of the new and extended development areas. Clearly the grants will make a big contribution there. Again, the attempt to be selective in terms of manufacturing industry and a certain amount of science-based

industry is both acceptable and right. Therefore, I, too, wish we could develop more selective means to define where incentives should be given.
The third aim is to help change the structure of British industry. Mergers are going on, but there are mergers and mergers, and one of the best pieces in the White Paper on the I.R.C. is the fine distinction it draws between mergers and take-over bids which are helpful to industry and which lead to the strengthening of a firm and other changes which have only a financial effect.
Here we are introducing an entirely new piece of machinery. Obviously, its rôle has yet to be fully amplified, but there are many functions for the I.R.C. to perform. By setting it up, we should make it easier to finance new innovations to industry. My right hon. Friend mentioned one when he referred to making it easier to finance innovations and develop them through public enterprises in a way that will not constantly require returning to the House of Commons for permission to carry out essential commercial decisions which should be going on all the time.
One of the great weaknesses of the public sector has been its extraordinary rigidity. There have been lots of quite sensible things which the public corporations ought to have been employed to do but, owing to their rigid structures, it has proved difficult for them to do these things. That is why I personally welcome an all-purpose Corporation of this kind which will be able to act in a much more flexible way.
I conclude by agreeing that in their purpose both of these are interventionist White Papers. These are kind of policies which we would expect any Government seriously interested in planning to put forward. The interesting thing about this is that hon. Members opposite seem not yet to have realised that the free enterprise economy, to which they pay such lavish tribute and so much lip-service, has virtually ceased to exist and that we are no longer talking about allowing the market to sort things out and to allocate resources and sensibly do this and that. In many ways it would be very relaxing certainly for hon. Members if free enterprise did that. We would be very much less busy and not engaged so often in debates of this kind. However, that is not the case.
The greatest difference between the two sides of the House about planning is that although hon. Members opposite started it when they set up N.E.D.C. five years ago, they never put any life into it, whereas in the 16 months or so that we have been in office we have been trying to do something to make planning effective.

8.2 p.m.

Mr. Peter Hordern: I, too, would like to be brief and I hope that the hon. Member for Stepney (Mr. Shore) will forgive me if I do not comment on what he had to say. I wish to concentrate my remarks on the proposed Industrial Reorganisation Corporation, but I should like to refer very briefly to the new system of investment incentives.
The first claim for the new system of cash grants is that they are worth more to the recipient than the old form of allowance, because they are made more quickly and especially when new techniques of discounting cash flow are used. Those arguments are self evident if the amount of money paid out is the same, or nearly the same, but the test is whether the cost to the Exchequer is greater or less and nobody has attempted, least of all the Chancellor of the Exchequer, to show that the new system of cash grants in total will be more to the Exchequer than the old system. Otherwise the Chancellor would not have welcomed it with such a degree of friendliness as apparently is the case.
It is argued that the cash will be concentrated on industrial and mining machinery and that this will help our balance of payments position. This is an attractive argument, but it is not so sound as it appears, as my hon. Friends have demonstrated, for investment in the service industries is not confined to office curtains, which the White Paper mentions, but, far more important, includes office machinery, which the White Paper does not mention, and other articles which help to raise the general performance of the country. My hon. Friends have mentioned in particular the hotel industry which is a particularly largo foreign exchange earner. Thus, the new investment scheme is an attempt to be selective, but it does not pretend to be selective on the ground of efficiency, but on what the Government

deem to be in the best interests of the country. This is the notable feature of both White Papers.
The merit of the old scheme of investment allowances was that the allowances were given only as against the tax which would otherwise have been paid on the profits which had been well and truly earned, but no such criterion can be advanced for the new system. Investment allowances represent only one part of this new equation for having made their diagnosis of the condition of the economy, the Government have not only decided to weigh cash grants directly in favour of those industries which can be considered to have some effect on the balance of payments position, but they have decided that a more positive form of intervention is necessary and that therefore the Industrial Reorganisation Corporation should be set up.
In this respect the Government seem to be trying to emulate the man who broke the bank at Monte Carlo. Their schemes become ever more fanciful. The Government have tried to solve the country's problems by applying the surcharge and by changing the whole basis of company taxation and by talking about a prices and incomes policy. Up to now, none of those schemes has worked and we are now being asked for another £150 million for a new scheme which the Government have borrowed direct from Italy. Not only will the new scheme not hit the jackpot, but it is likely to cost the taxpayer considerably more than £150 million.
This scheme, which is not only irrelevant to the country's problems, but bound to be extremely damaging, is based on an entirely erroneous conception of our economic predicament. In its diagnosis, the White Paper says in paragraph 4 that there is no evidence that we can rely on market forces alone to produce the necessary structural changes which the base requires. That may be so, but there is plenty of evidence that misplaced structural change can cause considerable structural damage, and that is what is all too likely to happen.
The White Paper says in paragraph 5 that the merchant banks and issuing houses carry through a great many mergers every year but in general can act only if their clients request. That is an unworthy and totally inaccurate remark


and anybody who knows how modern merchant banking methods are practised would appreciate that that was a somewhat old-fashioned notion of the practices of merchant banks. I think that that is generally recognised.
The White Paper says that some of the industries most in need of rationalisation have an in-built tendency to stay as they are. That is perfectly true, but the forces of the market cannot be blamed for this situation, because they have not been allowed to work. The quickest way to get results is to allow the market forces to work properly and to abolish the surcharge and reduce tariffs. I regret to say that that is much too realistic and unpopular an action for the present Government to take.
The First Secretary is often unfairly blamed for the spectacular failure of the Government's prices and incomes policy, although I must confess that I have not noticed that it has got him down very much, and of the National Plan. These matters in which he is engaged are comparatively small compared with the obvious concept which he has had in mind the whole time which is to be an actual entrepreneur himself. I often think that he feels himself to be a captain of industry manqué and now this new Corporation will implement what he has wanted to be all his life.
I must say in all seriousness to the right hon. Gentleman that he has made no case whatever for the establishment of the Corporation. The White Paper says that one of its objectives is to be to encourage mergers. Why, then, is there a provision in the recent Monopolies Act that all mergers involving a company with more than £5 million in assets should be referred to the Commission? I remember that my right hon. and hon. Friends fought this Clause through all the Bill's stages, as did several hon. Members opposite. It appeared to us to be a fatuous concept at the time and now the Government have recognised that by producing proposals allegedly for the purpose of encouraging mergers, although there is the earlier provision to stultify and discourage mergers.

Mr. Sheldon: Some of us feel that this provision fills a gap left by the Monopolies and Mergers Act.

Mr. Hordern: I agree that the right hon. Gentleman is now trying to say that the new proposals have some specific purpose, which is to make up for the great mistake perpetrated in the first place. However, I will not pursue that too much.
How can the Government claim to be in a better position to know whether a merger would be beneficial? What are the criteria to be used? I have never thought that the Government have sought to use economic efficiency as a criterion. One hon. Member opposite said that the economy would work more flexibly, but precisely what are the criteria which the Government will use in activating the Corporation?
Are we now to have a series of shotgun marriages? Does the right hon. Gentleman not realise that the best way to get mergers is to make life much more difficult for those companies to stay in their present condition, by creating tariffs and reducing the surcharge, and not to encourage them to make profits by cutting taxation? This is our solution. I do not think that the First Secretary is interested in getting an efficient economy. I say this on the basis of the reasons set out in the White Paper for introducing this Corporation and on the evidence of the Italian I.R.I. There has been talk in the Press about a visit of hon. Gentlement opposite, about 11 in number, who went to Italy last October. The I.R.I. started in 1933 because the Italian economy had completely broken down. It was necessary, if there was to be any activity at all, that this Corporation should be brought into being.
On the other hand, we have too much economic activity of the wrong kind. The I.R.I. owns five shipyards, all of which are losing money and the Italian Government's stake of about £212 million shows less than 1 per cent. return on the capital employed. If the Government managed to achieve that on their proposals I shall be very surprised. The Italian corporation runs a cotton mill in Naples without the smallest expectation of making money. It has recently built a steel works at Taranto, hundreds of miles from the nearest markets.

Mr. Alfred Morris: The hon. Gentleman refers to the steel mill at Taranto. Is


he aware that the investment by I.R.I. in Southern Italy has been a major factor in the development of that region? Is he further aware that he is being somewhat derisory about the achievements of I.R.I. as he said that it began in 1933 because of the breakdown of the Italian banking system. It is a much different organisation today and it has done a major job in developing the South. What does he have to say about the Autostrada del Sol?

Mr. Horden: There are many questions which the hon. Gentleman has asked which are important. He has referred to the steel works at Taranto, in helping the problem of unemployment in the South. We have no particular problem of unemployment; if anything, rather the reverse. The Government have to make up their mind what is the purpose of this Corporation. Is it to act in a social way or is it, as I understand the avowed objective to be, to act in an economic way to get the best out of the economy?

The Minister of State, Department of Economic Affairs (Mr. Austen Albu): The hon. Gentleman wrote his speech before the White Paper was published and before my right hon. Friend made his statement, because he said that the Corporation has no resemblance at all to the I.R.I.

Mr. Horden: I do not accept the hon. Gentleman's remarks and I do not wish to go into too much argument at this stage. One arguable point in this White Paper is the necessity that the Government have tried to adduce for this Corporation—the lack of finance from existing organisations. I do not want to cover too much of the ground of the I.C.F.C. and the F.C.I., but I should like to refer briefly to the Report of the Radcliffe Commission in 1959 which sought to find the holes in the provision of finance, and made several useful alternative suggestions. One suggestion was that term loans, as carried on in banking practice in the United States, should be encouraged here.
I see no reason why this system should not be adopted. The gap which exists is the provision of finance for what one could term real risk investment. Here the Radcliffe Report had a particularly novel and useful suggestion in proposing

the formation of the Industrial Guarantee Corporation which would be solely providing insurance against risk. This might have been given far more attention and would have fulfilled the avowed objectives of this White Paper very much better. By virtue of the surcharge and the failure of the incomes policy and credit squeeze the Government have succeeded in stratifying the economy. We are withdrawing more and more from the mainstream of world trade, and the Government are trying to wrap up the economy in a cocoon by raising tariff barriers and acting as a feather bed of last resort, if even in these competitive conditions, some firms find themselves in difficulty.
This is not a policy which can last if we are ever to try to compete in world markets. The First Secretary must not sit back and consider that his work is done because he happens to make a few friends of some industrialists. The time to sit back is when we can say that British goods can compete on equal terms with those from other countries in a free market. The evidence is that he is going the wrong way about this.

8.15 p.m.

Mr. Joel Barnett: I have listened carefully to the speeches from the opposite benches and I have failed to detect one constructive point. The speech of the right hon. Member for Altrincham and Sale (Mr. Barber) was shocking for a debate of this sort, dealing with the economic situation. There is only one criterion in considering the two measures we have before us—whether they improve or hinder the increased growth of the economy and improve the efficiency of industry. There is no other way of looking at them. I am sure that the public is absolutely sick of hearing the party political points that we have had from the benches opposite.
o matter how brilliantly or devastingly they make such points, what the public wants to hear are constructive comments. It has had enough of what has been said or what has been done in the past. It wants action now, and it is these measures that we have to consider. All the talk and the votes will cut no ice when the Opposition seek to be as negative in their criticism as they have been. The reason behind it all is the confusion


of right hon. and hon. Gentlemen opposite, the confusion that exists because of the basic underlying hatred of Government intervention. This is the real crux of the matter and it is causing the confusion of right hon. and hon. Gentlemen opposite, particularly in this debate.
On the the one hand, they do not like the I.R.C. because it is Government intervention in the private sector. It interferes with the free flow of the market. On the other hand, they want bigger incentives. It is this double think, this confusion of thought that makes them look rather foolish. If they followed the example set by the right hon. Member for Wolverhampton, South-West (Mr. Powell) they would at least look as if they had an alternative case. As it is, they are merely making themselves look foolish. Take investment incentives first of all. I willingly concede that on a purely arithmetical basis, comparing a situation now with that before Corporation Tax, the cost to a company buying a machine is higher. I accept that argument, in the arithmetical sense alone.
It is absurd to make that comparison in so narrow a sense. One must look at the picture as a whole. I should like to give an example. If a company ploughs back all its profits, buys plant costing £1 or £100,000 the balance retained in the company's reserves, after tax, is higher under the new scheme than under the situation existing before Corporation Tax. If any right hon. or hon. Gentleman wishes to dispute that I am quite willing to give way.

Mr. Patrick Jenkin: Can the hon. Gentleman tell the House what assumptions he is making about the company's distribution policy? Does he not recognise that the company has to provide profits for distribution?

Mr. Barnett: The hon. Gentleman was clearly not listening to me. I said in the example I gave that the company was ploughing back the whole of its profits. But to take it further and to take the example of that same company paying a dividend of up to 50 per cent. gross, and in some cases more of its profits after purchasing the plant, it would be left with a higher amount of retained profits than under the old system. There would be more left under the new system than there would have been under the old. If the

hon. Gentleman wants the figures, I should be happy to give them to him.
Another argument put forward is that a lower cost to the Exchequer is involved and therefore that it is harmful to industry. Again, this is strictly true. There is a slightly lower cost to the Exchequer, because some classes of investment have been discriminated against. I am happy to see certain classes of investment discriminated against. I should have thought that there was every ground for giving encouragement to the purchase of a computer rather than to the purchase of a desk, or, as has been mentioned, a fur coat for an actress, or a bingo machine.
I must, however, say that it is equally unanswerable that there is a need to give the cash grant for the purchase of office machinery. The use of office machinery is very urgently needed to help modernise our offices. I should like to feel that we were considering giving the grant to the distributive trade and even to the tourist industry, for which there has been some special pleading, if we were catering for the hotel which dealt particularly with foreign visitors. But it is not easy to do this. Indeed, the only constructive comment which we have had from hon. Members opposite is a request for even bigger tax allowances by extending the amount for cash grants to more sections of industry.
We should like to do all these things, but my right hon. Friend the First Secretary of State made it clear that if we are to have some degree of priority we must deal first with the manufacturing industries. Therefore, while I favour the idea of cash grants and of selectivity, I hope it will be possible to put into the legislation a degree of flexibility which will allow us to bring in new assets and, indeed, new parts of the country quickly without having to introduce fresh legislation.
I should like to make a special plea for Lancashire here. I am delighted that at present there is no unemployment there, but we must not be over-optimistic. In this and other measures which the Government have been taking it is important that we should not only stop but help to reverse the drift to the South. One of the attractions of the White Papers before us and of other measures which have been taken is that we do not


need to wait once a year for the blunderbuss of the Budget. I will grant to the right hon. Member for Enfield, West (Mr. Iain Macleod) his pleasure in being able to say, "There you are—another Budget". I would rather see half a dozen Budgets a year introduced than one Budget which did nothing but act as a blunderbuss with no opportunity of adjustment throughout the year.
It has been said that the cash grants will go to the inefficient and will encourage reskless and wastful spending. I find this a very strange argument. It assumes that an inefficient company will spend £1,000 in order to get back £200 one and a half years later. But, even assuming that inefficient companies would do this, there would be some little value from the new plant which they had purchased. The inefficient, who are not always the small firms, will find the cash grants most attractive, but the argument that it is wasteful and involves the spending of a net £800 instead of £1,000 when otherwise it would not be spent at all is rather odd.
I would have thought that to help the small companies would be particularly invaluable because they give the greatest possible margin for improvement. It is the least efficient companies which we want to help by use of the investment grant or to merge under the I.R.C. But to base an issue of principle on the simple statistical deduction of the argument put forward by the right hon. Member for Altrincham and Sale is to take an isolated view of a transaction and to give a completely distorted picture. It also ignores the fact that the old investment allowance was simply not understood as an incentive and is now replaced by a grant which is more easily understood and assessed.
I hope I have shown that, taking the picture as a whole, the investment grant is a great encouragement to industry. This is surely what we should be seeking rather than making party political points.
On the subject of the Industrial Reorganisation Corporation, I should have thought that there was no dispute between us about the need for mergers, acquisitions and further amalgamations. We agreed in the debate on the Monopolies

and Mergers Bill that this was precisely what we wanted. It seems to me that we are back to the old argument of the free play of the economy or Government intervention.
The nationalisation argument is a red herring and is known to be such. If right hon. and hon. Members opposite want to read nationalisation into the White Paper we cannot stop them, but on any reasonable understanding of words this is clearly not the intention.

Mr. Biffen: Would the hon. Gentleman agree that the thought that there may be the implications of nationalisation in these proposals is not confined to right hon. and hon. Members on this side of the House? Has he read in the New Statesman the article by Michael Posner headed "Nationalisation: Italian Style"?

Mr. Barnett: We are debating not an article by Michael Posner but the White Paper. We are concerned not with what other people have been thinking or writing but with the facts in the White Paper and in the First Secretary of State's speech. I would say to my hon. Friends on the subject of public ownership that this is not the right instrument and it is not the purpose intended for the Corporation.
The £150 million which has been mentioned has tended to obscure the whole scheme. I accept that there is no shortage of money for worth-while mergers. My hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) may be right in saying that we need money for medium term finance. I just do not know. But if the purpose is the rationalisation of industry—and this is what the money and the I.R.C. are for—the money would be available, assuming that it was a commercial proposition. This is perhaps the crux of the matter because if the Corporation lends when others will not, on what terms do we put in public money?
On the one hand, we have been told that competitive rates should be charged so as not to undercut private competitors such as the banks and other institutions. On the other hand, if full rates are charged for the risks involved, hon. Members opposite will no doubt ask that the matter should


be reported to the Prices and Incomes Board. This illustrates the confused state of mind of hon. Members opposite. If I were lending in circumstances in which there was an unusually high degree of risk, I would want a reasonably well covered debenture and to charge a rate of interest depending on the cover. But equally I would want a little sugar. I would want an option to convert into equity, and I see no reason why the public Corporation should not do likewise. But I hope that it is not simply the intention that the Corporation should break even given one year with another or that its sole intention should be to make a profit, although, of course, where we are investing we should have a commercial return. But I hope that that is not the sole intention of the Corporation, otherwise comparison with the institutions' profits will become the sole criterion and the chairman will be constantly looking over his shoulder, to the detriment of the whole purpose of the exercise.
There is bound to be work of a non-profit nature. As my right hon. Friend the First Secretary said, it will do a great deal of work helping to bring companies together but, in the event, they may then obtain the money, if it can be so obtained, from a merchant bank or other institution. What happens then? Does I.R.C. charge as a merchant bank would charge for the work that it has done, despite not having lent any money at all, or will the administrative charge fall on the Corporation, so that we shall then have right hon. and hon. Gentleman opposite coming forward and saying, "There you are: it has made a loss".
The difference between I.R.C. and the merchant bank is not an unimportant one. A merchant bank has as its prime purpose the making of a profit for itself. I.R.C. has to make a profit for others, and I should have thought that right hon. and hon. Gentlemen opposite would have been delighted with that. But I want to see I.R.C. helping to take initiatives to make a profit for the nation, and it is those initiatives from the chairman and the staff of the Corporation which we are really going to need. Therefore we need men in the Corporation who will show a great deal of drive; and enterprise for, without it, the whole exercise will not be worth while.
I accept that I.R.C. and the new investment grants are not the answer to all our problems. I doubt if anyone has an all-embracing solution, and certainly right hon. and hon. Gentlemen opposite do not have an answer to all our problems. Even Sir Paul Chambers and Lord Beeching do not have all the answers to all of the problems. Indeed, perhaps when we have the Companies Bill on the Statute Book we will find that even I.C.I. does not have all the answers to some of its own problems.
I do not expect perfection from these two Measures. That may only be of marginal help, but those who honestly accept the need for Government intervention should welcome the two White Papers.

8.31 p.m.

Mr. N. R. Wylie: I intend to deal solely with a point relating to Edinburgh, and it is a matter which directly concerns hon. Members representing Edinburgh constituences, and few other Members.
While the whole of Scotland has been made a development area, there is one small enclave round Edinburgh which has been excluded from those provisions. The effect of that on industrial development in the city of Edinburgh will be disastrous in the view of many people of all shades of political opinion. It is not in any way comparable to the position of certain other cities and towns in England because of the larger sections in England which are excluded from the provisions relating to development areas. It is not in any way comparable to those part of Wales which are excluded from development areas. It is a unique provision which bears all the signs of being a token exclusion. If it is a token exclusion, it is one which is going to operate very harshly and severely on business and industrial development in Edinburgh.
I cannot understand the reasons for this unique provision. It is certainly not a question of overfull employment, because there are other areas of Scotland where the level of unemployment is just as low and in some cases lower than it is in Edinburgh. There is an area in North Fife, for example, where the level is lower, and in Galashiels and Hawick it is less than 1 per cent.; so it is not open for the Minister to say that Edinburgh is


excluded because it has a level of unemployment of 1·6 per cent.
Even so, taking the level of unemployment in Edinburgh, I submit that that in itself is one of the reasons why Edinburgh ought to be included in the general development area, because the kind of industry which Edinburgh needs and with which Edinburgh can readily cope is precisely that capital intensive industry which makes small demands on limited labour resources.

Sir Harmar Nicholls: My hon. and learned Friend makes a very important point about Edinburgh, but may I ask him if he gave notice to the Scottish Office that he was going to make it? I should have thought that a representative of the Scottish Office ought to be on the benches opposite to listen to it.

Mr. Wylie: In fairness to the Scottish Office, it knows about it. It has been brought to the attention both of the Scottish Office and the Board of Trade by representatives of all shades of political opinion in the city of Edinburgh.
Edinburgh has a low level of unemployment, and the kind of industry which it has been endeavouring to develop over the years, and has done so with unique success, is precisely the type of industry which is of a capital intensive nature, making limited demands on the limited labour resources of the city.
I make no apology for mentioning my own constituency, because it is in Pentlands that there is concentrated the most highly developed technologically advanced industry in this country, and certainly in Scotland. In the Sighthill district of my division there is a whole concentration of industries and firms which are typical of the capital intensive industries which will be heavily hit by these proposals.
What I am concerned about is not only that we shall not get any new industry like that—in a situation where only a few miles away one steps into a development area, why should an industrialist intending development along those lines come to this small part of Scotland which alone is excluded from the advantages of the development area incentive grant provisions—not only shall

we not get any more of that type of industry, not only shall we not get development of our existing industries in the city, but I am afraid that we shall lose some of the highly developed capital intensive industries which we already have there.
I know what I am talking about because I have had discussions on this question in Edinburgh. I know of one firm which is contemplating a £2 million development in this area. This is precisely the kind of development which will be heavily hit by the provisions of this White Paper. If these provisions stand that development will not take place there. I hope that the Board of Trade and the Scottish Office will use commonsense in considering this and will keep Edinburgh in with the rest of Scotland if the whole of Scotland is to be a development area.

Mr. Barber: As there are English Ministers here, I should like to point out that there is an even worse example than that quoted by my hon. and learned Friend the Member for Edinburgh, Pentlands (Mr. Wylie). I am referring to Bridlington, which was a development district, but which has been cut out altogether, according to the map. It is not even in a development area. The people of Bridlington consider—and I believe this to be so—that this will have serious consequences for the industry and commerce there.

Mr. Wylie: I can understand that, but that is the converse of the case I am quoting. Edinburgh is put at this disadvantage, and it cannot afford to be put at a disadvantage of this gravity.
Finally, I must say a word about Leith, because I know that if my hon. Friend the Member for Edinburgh, North (Earl of Dalkeith) had had the good fortune to be able to take part in the debate he would have said something about it.
The case for Leith is incontrovertible. Only recently a massive public investment in Leith to the extent of £6 million has been agreed on as a result of long years of consideration by the Rochdale Committee, and it would make nonsense of that kind of investment if one could not at the same time develop the surrounding area to take advantage of the deep water facilities which the development of Leith Docks will provide. About 100


acres of land have been reclaimed for the specific purpose of enabling industrial development to take place in the vicinity of Leith Docks. If this White Paper excludes Edinburgh from the investment grant incentive provisions, that development will not take place. The Scottish Co-operative Wholesale Society has been intending to make a £2½ million development in the vicinity of Leith Docks, but it will not be able to do that if this kind of provision is allowed to stand. To my mind this is the negation of planning.
I am not making a political speech, because all the political parties in the Edinburgh Corporation have got together in the hope of inducing some change of view or change of heart on the part of the Government. I understand from a letter received by my hon. Friend the Member for Edinburgh, West (Mr. Stodart) that it is impossible to disentangle Leith from Edinburgh. I do not see why, but I should like to know whether the Government will consider excluding from the exclusion—if I might put it that way—the area controlled by the Leith Dock Commission, so that this vast public investment which has been promoted over the years will not be largely negatived.
I do not wish to take up any more time. I have spoken for about ten minutes on a matter which has affected only Edinburgh but about which members of all shades of political opinion on the Edinburgh Town Council, together with all industrial and commercial interests in Edinburgh, are deeply concerned and worried.

8.46 p.m.

Mr. A. E. P. Duffy: I can understand the feelings of the hon. and learned Member for Edinburgh, Pentlands (Mr. Wylie) about the exclusion of Edinburgh from the development area. Later I want to say a word about my region, from the same point of view. It may surprise some hon. Members, especially those who live in Yorkshire or have had some connection with Yorkshire, to know that there are some undesirable trends in Yorkshire which point to its being given less favourable treatment than is being given to other parts of the country which are not nearly so deserving. I sympathise with the hon. Member for Pentlands, but I shall not follow his argument.
I welcome the investment incentive scheme, and I intend to touch only upon

the White Paper dealing with it. I welcome it, first, because although most investment intentions are encouraging, no one can believe that they will continue to be geared to a 4 per cent. growth rate when—and we must be quite honest about this—we are achieving only a 2½ per cent. growth rate.
Secondly, I am glad that we have published this White Paper because there are divided opinions on the subject of the desirability of such encouragement for investment. Economists disagree about most things, and there is as profound disagreement amongst them concerning the ratio between investment and growth as there is about almost any other contentious economic point.
The fact remains, as the right hon. Member for Orkney and Shetland (Mr. Grimond) said earlier, that we devote a smaller ratio of our national income to investment than does any other European nation. We are at the bottom of the growth league table. The ratio between investment and national income has been rising since the 1950s, although it has not yet paid off in terms of productivity. Only last month, in an interesting article in Lloyds Bank Review, a Mr. Angus Maddison pointed out that British industrial productivity is below that of any other Western European country north of the Alps. We come at the bottom, with 2·5 per cent. against 3·7 per cent. for Germany, 3·8 per cent. for Italy and 3·9 per cent. for France.
I am merely under-scoring the point made by the right hon. Member for Orkney and Shetland, although I am making a slightly different approach to it. I am providing the House with different information, although, like the right hon. Member for Orkney and Shetland I shall also mention Japan and make the point that the figure for Japan is 7·6 per cent.
If for no other reason the time is ripe for a fresh look at investment incentives, although there are many other reasons of a domestic nature. No one can say that the old system is no longer effective and we had practical arguments about this last spring, on the Finance Bill, when it was stated that the Exchequer was getting a poor return on its roughly £300 million expenditure.
I return to Mr. Maddison. It is significant that his article shows that in the


period from 1955–64 the tax treatment of investment in the United Kingdom was no less favourable than that of all the Continental countries to which I have referred. I know that that is not the end of it and that the United States is much closer to us than to those other countries. One has to take this balanced view, but there are still grounds for dissatisfaction.
Mr. Maddison's is not the only work on this question, nor the only survey which points to the practice of all but the most financially sophisticated firms still judging an investment project by the likely gross return on its cost. Some people have implied, as I have done, that the old subsidy of £300 million a year was simply not producing the intended effect. There was undoubtedly a tendency, despite all the denials of some hon. Members opposite last spring, for the old investment allowances to be used more for the tax saving which they brought than for the modernisation they were expected to bring. Finally, although I do not expect this to impress hon. Gentlemen opposite, there was a need for a new system of incentives for investment, if only to bring them into line with the Corporation Tax.
What impresses me most of all about the investment incentives—in some senses, this reminds one of the Corporation Tax—is that this is a much more flexible system, which allows for changes in the timing of the impact of such incentives, which certainly provides for a change of location and also for a different approach to a different type of asset. I think that these changes are significant and are far reaching in their effects.
I have not heard the last three speeches, though I have heard all the others, and I felt that all the benefits which could flow from this new scheme have not been mentioned. There has been, rightly, some criticism of the scheme from the other side of the House, but against this, some of the benefits which are likely to accrue to business need to be stated.
In the first place—this has been said often enough, but cannot be overstated—because the new scheme involves cash grants, there is obviously a much better connection now between cause and effect.

Second, such location is needed when so much evidence is available mat many businessmen, particularly among the smaller firms, find difficulty in understanding how tax allowances should be taken into account in trading, investment and pensions. It was said during discussion of the last Finance Bill, but it needs to be said again, that one cannot make this kind of arrangement too simple for some businessmen.
Third, many such small businessmen will no longer have to wait for profits before they begin recovering cash. Fourth, such cash grants are capable of concentration in key sectors of the economy. Fifth, the only firms which gain will be the fast-growing firms, whereas the investment needs may be outrunning the inflow of cash. Sixth, firms are more disposed to take risks for modernisation and especially in connection with exports. With today's trade figures, we are reminded also of the need to look again at the possibilities of import saving.
Finally under my heading of benefits, there is the need for more discrimination, which this scheme provides, between advanced machinery and the old standard type of machinery. Of course, objections could reasonably be lodged against the scheme and an obvious one is that which I have hinted at—that it allows discrimination.
I can understand hon. Gentlemen opposite being rather nervous at the possibility of discrimination being exercised by, say, the Board of Trade, certain people in Whitehall and Government Departments. However, they should realise that the old scheme was also discretionary. It offered a larger subsidy to some firms than to others and, as has been said, experience abroad suggests that if investment levels need to be sustained at a high and steady rate of growth, it is unlikely that that can be achieved without some direct financial encouragement from the State.
I will briefly consider some of the regional distortions, as the right hon. Gentleman the Leader of the Liberal Party described them. There are some undesirable anomalies in the scheme and I will consider them in connection with Yorkshire, which is not eligible for the full grant. Some hon. Members who


know as much about Yorkshire as I do will no doubt remind me of the argument that Yorkshire should not be given preferential treatment because of its low rate of unemployment. It is because Yorkshire has such a low level of unemployment that it does not come in for special attention, let alone special treatment, these days.
The House should realise that Yorkshire's low level of unemployment is associated with its high level of migration. It lacks growth industries. Where such industries do exist in Yorkshire their rate of growth is less than the national average rate of growth. Yorkshire has the lowest percentage of employees in expanding industries anywhere in the United Kingdom, with the exception of Northern Ireland—19·4 per cent. compared with the national average of 21·8 per cent. Although Yorkshire may have only 8·3 per cent of its employees in the contracting industries—as opposed to 11 per cent. nationally—this is not sufficient to compensate for the lack of expanding industries.
I was not surprised to read an article in the Westminster Bank Review some time ago, written by two university dons, stating that the Yorkshire region had the lowest number of £5,000-a-year earners of any region in the country. The region lacks light engineering industries, in which the biggest expansion in employment is anticipated in the National Plan, and this state of affairs has been concealed for many years by the region's comparatively low level of unemployment.
Certain undesirable trends are beginning to break the surface. This concealment has influenced sucessive Governments, and rightly so, in their policies, whether in respect of I.D.C.s or preferential treatment—and that applies to this latest scheme for investment incentives. I urge the Government to note that they are likely to be under pressure from hon. Members who represent Yorkshire constituencies to persuade them to look more closely at the position of Yorkshire in relation to special treatment. The Government may not think that Yorkshire deserves special treatment in the scheme before us, but if certain trends continue we will ask for this special treatment in similar schemes which are introduced in future.

8.54 p.m.

Mr. Charles Fletcher-Cooke: I will try to compress into six minutes a speech which is the first I have been able to deliver in the House for eight months. This will take some doing.
The theme behind both White Papers—the assumption on which they are based—is that business men who are short of money with which to do what they ought to do, either in investing or merging, will, given more money, invest more and merge more. It is that assumption which I completely challenge. The investment grant, as I have always held the investment allowance, only marginally induces people to do what they would otherwise do in any case. They regard it as a sort of bonus and, in the same way, I do not believe that there is any material shortage of money for the purpose of bridging a merger or for any of those other purposes. Indeed, in the latter case, it may do harm, because it does not tackle what is the major fault of British industry today.
That trouble is not lack of finance capital, except very much in the exceptional cases to which the hon. Member for Manchester, Cheetham (Mr. Harold Lever) referred. The trouble is a sort of lethargy from top to bottom; a sort of fatty degeneration, not due to lack of money but to too much taxation, and to too much kindliness in regard to sacking a lot of overmanned staff that should be thinned down. Public money should only be spent if it is directly linked to curing that trouble, and not spread about—whether 20 per cent. or 40 per cent.—all over the country in giving bonuses to people of whom 80 per cent. or 90 per cent. will in any case invest.
I contrast with this very free-handed method of spreading public money about the way in which public money was strongly and specifically linked to the thinning down of the cotton industry under the last Administration. It was a condition for the grant of public money that the equipment should be renewed, that there should be direct physical investment for higher productivity, and, as a natural consequence of that, that the labour force should be reduced, because the cotton industry was overmanned. As a direct consequence of that policy—and I am not totally anti-interventionist, as I think that what I am saying shows—the


cotton industry today is producing more, and more cheaply, and is employing far fewer people than before that operation was undertaken. I see nothing wrong in a repetition of that operation, but these vague disposals of public money without any sort of guarantee where or how they are going seem to be totally contrary to the economic doctrine on either side of the House. It therefore requires a good deal of justification.
In the promotion of mergers, about which some hon. Members opposite have been particularly anxious, it seems to me that we are getting in danger of worshipping size, again for its own sake. When the President of the Board of Trade was sitting on these benches, he spoke in very different tones. I do not have time to quote his speech in 1962, but he then very strongly attacked the size, for example, of A.E.C. and G.E.C.; they were too big. Now, of course, the theme of the other side is that British industry is not big enough—it cannot instal computers, it has not the export facilities, and so on, and we must make it bigger. All I say is that if we artificially create greater size, we may get more computers installed and have a better export organisation but we will lose one great sanction against overmanning which, as I have said, I regard as the real fatty degeneration of British industry today.
There is no doubt, and this aspect was touched on by one or two hon. Members opposite speaking from below the Gangway, that as soon as we get organisations too big there is a lot of concealed underemployment, and a lot more restrictive practice than occurs in the smaller firms employing fewer people. I believe that everyone would accept that statement. Therefore, what we may gain on our computers and our export facilities, we have to be very careful we do not lose on the real trouble with British industry, which is that there is in a great many areas a great deal too much underemployment.
I undertook to sit down at 9 o'clock, and I shall do so. It seems to me that the case for the spending of public money to this degree has not been made out. I do not regard these two White Papers as a sinister Socialist plot, but I do not think that they will in any way remedy

what is the real trouble that we all face today.

9.0 p.m.

Mr. Iain Macleod: It is, of course, by the wish of the Government and not of the Opposition that we are debating these two White Papers together. It would have been much better if we could have discussed them separately. The debate was opened by the First Secretary of State and Secretary of State for Economic Affairs in a speech which was remarkably uniformative and, in at least one aspect, an extremely unhappy speech.
I start by talking about the Industrial Reorganisation Corporation because we argue against the Investment Incentives White Paper in our reasoned Amendment. Our attitude towards the Industrial Reorganisation Corporation is that of the preacher about sin—we are against it. We do not think it is the Government's business; we do not think the Government do it very well; we do not think the Government should do it at all.
Before I launch into some more detailed criticisms of the I.R.C., I should like to make it clear, because these things are not always reported outside as they are said in the House, that anything I say is in no sense directed against Sir Frank Kearton. The only attractive part about the I.R.C. is that the First Secretary has persuaded Sir Frank Kearton to take the chair. He is a man of very great ability, and he will understand, as we do inside the House, that our criticisms are in no way personal or directed against him.
This White Paper is a short one, it is vague, and it might be deliberately vague. Certainly, in my view, it is one which is riddled with fallacies. Because I always like saying things to people's faces, perhaps I may be allowed to repeat half a sentence I said before the First Secretary came in. I said that his speech was uninformative, which is a matter for debate. I also said that in one respect I thought it was unhappy. What I was referring to—I do not want to hammer the point—is that although it may well be that there are rules of procedure which bring the words within our Parliamentary to and fro of debate, I am bound to say that I do not think he would wish


his reference to my hon. Friends from Ulster to stand uncorrected on the pages of HANSARD.

Mr. George Brown: I am grateful to the right hon. Member, and I am sorry that I was a wee bit late coming in. We have many to-ings and fro-ings across the House. If anyone on either side feels affronted by what I said, holding my views as I do, may I say this? We are all hon. Members of this House and we address each other that way. I would wish our arrangements to stay that way. I simply say to anybody who feels affronted by what I said that that certainly was not my intention.

Mr. Macleod: Very well. I am grateful and accept that.
I have said that the Industrial Reorganisation Corporation White Paper is riddled with fallacies. Perhaps I can demonstrate some of them. First, there is the fallacy to which my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) referred in an admirable speech—over-concentrated it might have been—the fallacy of the economics of scale. We last had this in detail in this House on the famous occasion which the First Secretary will well remember of the steel debate, when at the end of the debate on the White Paper the First Secretary gave the startling news that if anyone came to talk to him he would listen. This so took aback two of his hon. Friends that they decided to vote for the White Paper on that assurance. In fact, how true is this argument about the need for economies of scale? How true is it that companies outside the United States, which is a very different example, are so much smaller? I have here the figures for industrial companies outside the United States—the largest 50, the largest 100, the largest 200. Of the largest 100, 29 are in Britain, 19—the next—are in Germany, 14 are in Japan, 12 are in France, 6 are in Canada, and 7 are in Italy. The figures for the largest 200 are much the same.
Therefore, to put it mildly, it is possible to exaggerate the point that economies of scale have not been achieved in this country. What I think the Government constantly fail to hoist aboard is that the whole point is not so much economy of scale. The true need for this country is a larger industrial

base. When we can have a straightforward and clear announcement of the Government's intention in relation to the Common Market, this and many other proposals will be much more arguable than they are at present.
I turn to the fascinating sentence at the end of paragraph 7 of the White Paper on the Industrial Reorganisation Corporation:
It"—
that is, the Corporation—
will not support ventures which have no prospect of achieving eventual viability.
With respect, that is exactly like a newspaper announcing that in future its racing correspondents will only tip winners. It would sell a lot of papers on that basis, but I think the truth would catch up with it fairly soon.
I do not know which merchant bank is concerned, but Anthony Bambridge in an article in the Observer on 30th January said this:
One of Britain's biggest merchant banks investigated 51 possible merger situations last year. Only 14 came off.
Therefore, 37 out of 51 did not achieve completion. As nobody attacks the brilliance of the enterprise of our merchant banks, and as I think that most people would agree that the best prospects in the future will continue to go there, it follows that the failure rate of this Corporation, which will have a brilliant man at its head—I paid a tribute to Sir Frank Kearton when the First Secretary of State was not here; he will be able to read it in HANSARD—and a part-time chairman and a board which has not been announced, will be higher still.
The hon. Member for Manchester, Cheetham (Mr. Harold Lever) argued the question whether there was a gap or whether there was not. I wholly disagree with the hon. Gentleman's argument that one group of companies, perhaps supported by a merchant bank, and another group of companies supported by another merchant bank might jointly come to the I.R.C. The one thing which is quite certain is that, if that situation arises, it might fail because of a clash of personalities, or it might fail because of some management difficulties. It will never fail on account of finance. There is no difficulty at all about this. If


hon. Members doubt this, let them read the last debate on economic affairs in the House of Lords a day or two ago, where they will find the most eloquent and weighty evidence of this.
The next question is whether the market has in fact failed to bring about desirable mergers. The whole of the Government's case is based on this. The burden of proof is on the Government. The Government say that the market has so failed. This is their argument for the White Paper. I should like to call an interesting witness in this matter. The House will remember that in 1955 the National Institute of Economic and Social Research identified 512 British companies with assets of over £ 2½ million. This became a matter of some political discussion, because the Conservative Central Office published virtually the same list, with the suggestion, right or wrong, that the Labour Party had some sinister designs upon them.
I read these words from this extremely interesting document:
It is therefore interesting to see, after nine years, how many of these companies have now lost their independence, not through nationalisation, but by take-overs and mergers. The astonishing result is that since 1955 112 of the 'independent' companies, whose assets totalled £945·7 million, have become subsidiaries of others, a reduction of 22 per cent.
This document is published by the Labour Party research department in its information series. Thus, the argument of the Government is that there is such a gap. The argument of Transport House—I must say that the evidence on the figures supports it—is that there is not. No doubt, the President of the Board of Trade will be able to deal with the point.
The next point on the special matters to which I wish to direct the attention of the House is the curious position in relation to the Monopolies and Mergers Act, 1965, and paragraph 11 of the White Paper. The President of the Board of Trade will tell me whether I have this right or not. I think I have. The position is that, if Sir Frank Kearton, as Chairman of Courtaulds, arranges a merger, he is subject to the ordinary law of the land. But if Sir Frank Kearton, as Chairman of the I.R.C., arranges a merger, he is above the law.

Mr. George Brown: No.

Mr. Macleod: Well, it is not inquired into under the Monopolies and Mergers Act, 1965. That is the situation as laid down in the White Paper.

The President of the Board of Trade (Mr. Douglas Jay): No. There is no statutory exemption for mergers which may be carried out by the I.R.C. There will be consultation with the Board of Trade to decide whether or not there shall be reference to the Monopolies Commission.

Mr. Macleod: With respect, that is not quite what the White Paper says. The words in paragraph 11 are:
As the Government made clear when the Act was introduced, it is no part of its purpose to hold back mergers which are desirable in the national interest. Arrangements will therefore be made, so that companies participating in the Corporation's schemes can be certain"—
note that word—
before schemes are completed, that the resulting mergers will not be referred to the Monopolies Commission.
Following that, I think that it would be right to knock the last nail into the coffin of the strange episode in the First Secretary of State's speech. The right hon. Gentleman will remember that on three occasions, twice with direct quotations, he quoted from the recent speech by Mr. John Davies. The point has been dealt with already, in his usual trenchant way, by my hon. Friend the Member for Shipley (Mr. Hirst). But I have since obtained the text of the address which Mr. John Davies gave, and there is something I wish to put on the record. It is quite right that he went into an analysis of some of the difficulties. I dare say that we would not much disagree on that, event across the Floor of the House, but it is for the House to decide what sort of impression the First Secretary of State chose to give.
I shall take a simpler course. I shall read from that speech Mr. John Davies' conclusions:
I believe that the proper instrument to procure this great change is the trade association system. I believe that only there, where businessmen over generations have been accustomed to meet and exchange views on their interests in an atmosphere of comprehension and expertise, can be the seed by sown of union and concentration.
One could not have anything more different from the impression which the First


Secretary of State gave the House this afternoon.
I return now to the White Paper and the comment already made on the links made with the Ministry of Technology with respect to the hon. Member for Cheetham, I do not believe that this is accidental. I do not see the right hon. Gentleman the Minister of Technology in his place, but the whole of this White Paper has the sort of endearing naivety which the House has come to associate with him.
The Minister of Technology is, we know, an enthusiast for this White Paper. The First Secretary of State need not laugh about that. It is the first thing that the Minister of Technology has been enthusiastic about for a long time. What worries me is not that the Minister of Technology is an enthusiast but that he is an enthusiastic Socialist and is on record over and over again as believing in—I was going to say the perfectly reputable view, but we will let that pass—the point of view that nationalisation should be widely extended over the whole of British industry. But Sir Frank Kearton is also an industrial adviser to the Ministry of Technology—is he not?

Mr. Albu: Yes.

Mr. Macleod: The First Secretary is disagreeing but I prefer to have it from the Minister of State.

Mr. George Brown: The right hon. Gentleman is going below his normal standard. What does he mean by saying that I was disagreeing? I was not showing disagreement.

Mr. Macleod: In this House when we move our head from side to side we are disagreeing. If we move it up and down, that is agreeing.
I note all the assurances that the First Secretary of State has given but my right Friend the Member for Bournemouth, West (Sir J. Eden) made a valid and excellent point when he said that the drift to compulsion has been there throughout the months and, indeed, now the years, of the prices and incomes policy as represented by the First Secretary of State. We note the right hon. Gentleman's assurances, and I even go so far as to say that he himself believes in them. But that is one of the things that worries me about

the present situation. Perhaps I may quote the end of a limerick—
It wasn't the words which frightened the birds But the horrible double entendre.
There can no doubt that the attitude of industry and of all commentators to "Irc"—which is the proper name for this Corporation—is the one that we share on this side of the House.
Now I turn to the White Paper on Investment Incentives. The Amendment spells out the objections to it and my right hon. Friend the Member for Altrincham and Sale (Mr. Barber) outlined some of them this afternoon. I understand the argument, in which hon. Members on both sides took part, about the relative value of these incentives to industry and we will wait and see if it is possible for the President of the Board of Trade to prove, if he can, that all the accountants, businessmen, commentators and politicians are wrong and that in some extraordinary way these incentives are of more value than those which existed before.
We are in a position of having to do something about this situation, because one of the results of the Corporation Tax—an almost accidental result—was to devalue tax allowances for capital expenditure. The tax allowances we left from the Conservative Administration were, certainly for the first year, the best in the world. There can be no question of that. The Chancellor of the Exchequer said that he wanted to look at the whole question and after months of delay and uncertainty this White Paper has been produced.
The response to it has varied from the critical, to the hostile, to the abusive. Perhaps I can illustrate this from the headlines in the three "quality"—as they are called—Sunday newspapers immediately after the White Paper was published. The Observer referred to "The investment muddle". The Sunday Telegraph headline read, "Feather beds for feather brains". The Sunday Times said that there were two reactions to the new incentives—first, shock, and, secondly, growing alarm at the uncertainties and administrative problems—and I want to return to this, particularly as the President of the Board of Trade is to reply to the debate.
The First Secretary, of course, is undaunted by this. To his credit, he always


is. The First Secretary lives in a sort of private dreamworld in which all the "goodies" are on his side and all the "baddies" are against him. I shall quote the hon. Gentleman's exact words, for having heard him personally on the radio I immediately sent for a transcript. At seven o'clock on the evening on which the report came out, which was the 17th, he was asked about the views of the Association of British Chambers of Commerce and he said that the most forward-looking people in industry—
this I actually know"—
were with him. There is very little evidence of that. He went on to say—and these are the words to which I wish to draw attention—
But of course, the A.B.C.C. is like any other body, it has to represent at the end of the day not only all its members but its least forward-looking members. I am not therefore surprised that they feel they have to say that".
If the right hon. Gentleman meets any criticism, not only does he brush it aside, but he casts aspersions on the motives of those who criticise him. He does that to hon. Members on this side of the House over and over again. When we are in honest disagreement with him, we are not saboteurs any more than he is and we are no less patriotic than he is. We are carrying out what we believe to be our ordinary responsibility in this matter and he knows perfectly well that bodies such as the National Chamber of Trade and many others have put forward hostile views.

Mr. George Brown: The N.U.R.?

Mr. Macleod: I am talking about national groups of employers, because the investment incentives are mainly concerned with the employer's side of industry.
My right hon. Friend the Member for Altrincham and Sale mentioned that the C.B.I. had put this idea a long way third in its list of preferences, although it was perfectly fair for the President of the Board of Trade to say that that was on the basis of a 15 per cent. cash grant. Even so, it showed a preference for free depreciation or the existing system, and as free depreciation is part of the existing system the gap between these two is so wide that the Government cannot possibly plead that in aid.
I want now to come to the subject of administrative delays. We now know from an answer which the President of the Board of Trade gave earlier that for this purpose alone he is taking on 1,100 more staff at a cost of £2 million a year in order to pay out to industry £100 million less. Those are the economics of Bedlam. The right hon. Gentleman has a vast Department, a curate's egg Department, as we know, but those who work in the development districts find it much more difficult to settle arguments with the Board of Trade than with the Inland Revenue. There can be no argument about this and I quote from the Sunday Times of 23rd January:
'Our experience of getting grants out of the Board of Trade is one long quibble after another' was one engineering company finance director's complaint. 'We know where we are with the Inland Revenue, but at the Board of Trade you deal with lower grade people who are forever asking to see your drawings and checking tiny details'.
Anybody who has studied these White Papers can be quite certain that the grounds for demarcation arguments about pieces of equipment are virtually endless.
I turn to the special examples mentioned in the Amendment and first to building and construction. Building and construction is not only a domestic, but an international business. In the year ending 31st March last, British constructors carried out work to the value of £160 million in 81 countries and at home the building and construction industry naturally provides much of the infrastructure for growth. The National Plan looks for an increase in construction of more than 30 per cent. by 1970 without any substantial increase in the labour force. There must be some increased investment in plant and vehicles, and therefore treatment of these industries in this White Paper is wholly illogical.
On the question of transport, the processes of Government thought are again almost impossible to follow. Is not road haulage part of the production line of this country? Does it not carry the vast majority, something like 80 per cent., of the freight tonnage within this country? On what basis can one dismiss this vast industry in paragraph 31 and equate it, as presumably one does, in paragraph 14, with curtains, cutlery and television sets for rental?
No one has answered or attempted to answer the case made, from both sides of the House, more powerfully I think from this side, for tourism and hotels. On the basis of Sir Geoffrey Crowther's letter in The Times on 8th February, the hotels earned £120 million in foreign currency in 1964 and tourism as a whole earned £308 million. They are the largest single dollar earners in the country and the prejudice against the service and labour intensive industries is absolutely impossible to justify. In the affluent society, and here I agree with the Leader of the Liberal Party, there is bound to be an explosive growth in service industries. It is here that one could save labour with modern equipment.
Paragraph 2 of the White Paper indicates how one can save labour in other places, but it does not indicate how labour saving could be made in this direction, which is the most fruitful of all. It overlooks the possibility of labour saving in these expanding service industries by the use of new techniques. If I understood the speech of the Leader of the Liberal Party correctly, he offered his support, and I suppose his votes tonight, to the Government on these two White Papers. While he is going through the Lobby I can offer him, if he has not read it, an article in the Scotsman on 9th February, 1966, when John Graham shows in a series of tables the changing situation since the Labour Government took office in October, 1964. Mr. Graham shows that in every case businesses will receive less Government assistance in meeting the cost of new machinery, whether the assistance is in the form of tax relief or a tax grant. Anyone who knows anything at all about Scotland, particularly about the Highlands, knows that the two keys there are transport and tourism. If the Leader of the Liberal Party takes his support into the Government Lobby tonight he will be showing Scotland that Liberals are not fit to represent Highland constituencies.

Mr. Grimond: Would the right hon. Gentleman try the Western Isles again?

Mr. Macleod: Mr. Cameron will win the Western Isles next time. I am grateful to the right hon. Gentleman for making it clear that I do know something about the Highlands. Because of time

I do not want to go into the details of the change of treatment—and it is a very important subject—of the development areas. It is deplorable that the concept of the growth points has been abandoned. As an article in The Times said, it is deplorable that the crutch has been substituted for the encouraging hand.
The position is quite clear. Anyone who represents a constituency in the development districts, and I am talking about the existing districts, knows perfectly well that the wider one spreads this concept the less money there is available and the less inducement there is to the development districts. We reject both White Papers and we reject the Socialist thinking lying behind them. Months of delay and uncertainty have led up to them—months of delay and uncertainty since the very first mention of Corporation Tax. All that the First Secretary has produced at the end of it have been two blind mice, and we hope to cut their throats tonight.

9.30 p.m.

The President of the Board of Trade (Mr. Douglas Jay): After the speech of the right hon. Member for Enfield, West (Mr. Iain Macleod), which was in such marked contrast to the constructive speech of the Leader of the Liberal Party, I think that the House might like to know what the Government's proposals really are.
One main purpose of the investment incentives White Paper, and the Bill which will follow, is to strengthen and intensify our development area powers and to replace the Local Employment Act, which expires, in any case, in March, 1967. We are determined to overcome the handicap which the nation has suffered so long of under-employed areas at one end of the country and congested areas at the other. This is as important for economic as for social reasons. We shall never get full production until we have full use of economic resources.
The new legislation will intensify the changes of policy already made in the last year. We have already achieved much more in arresting the drift to the South-East than some hon. Members seem to realise. I promised in the debate on the Address in November, 1964, both to check the uncontrolled office boom in


London, which was at the root of so much congestion, and, by the use of industrial development certificates, to secure a major shift in the balance of industrial development between regions. Since the right hon. Gentleman accused us of being uninformative, I will give him and the House some information.
This objective, which we always claimed could be achieved, has already in great measure been achieved. The share of the national total of I.D.C. approvals in terms of square feet going to underemployed regions of Scotland, Wales, the North and North-West went up from an average of 39 per cent. in the five years 1960–64 to 50 per cent. in 1965. Those regions contain only about one-third of the population of Great Britain. At the same time, the share going to the three congested regions of London and the South-East, Eastern and Midlands fell from 40 to 30 per cent. That is an outstanding shift in the right direction, and it shows what can be done.
The progress made in the regions themselves has been even more dramatic. Because of the great affection of the right hon. Member for Enfield, West for Scotland, I will give the Scottish figures first. In Scotland, new factory approvals went up from 6 million square feet in 1964 to 11 million square feet in 1965—a rise of over 80 per cent., which will obviously gladden the heart of the right hon. Gentleman. Incidentally, this was a rise from 10 to 18 per cent. of the national total in one year. In Wales there was a rise in terms of square feet approved of 50 per cent. Northern Ireland, which has come in for some comment today, also had the best year for industrial development for many years. Negotiations completed in 1965 provided for projects with over 40 per cent. more new jobs in industry in Northern Ireland than the average of the three preceding years. In addition, by deciding to site the new nuclear reactor at Dounreay, the Government have shown that they are locating their own enterprises in these areas as well as asking private firms to do the same.
To ensure, in addition, that a fair share of the new enterprises and employment goes to the districts where surplus manpower exists, the Board of Trade

has launched two new programmes of advance Government-owned factories since October, 1964. These include 55 new factories, 32 of them in coalmining areas. Of the 55, already 16 are being built and tenants have been found for five. Construction of another 11 will start shortly and sites have been selected and are being purchased for all but one of the remainder. We shall launch a further and third programme as soon as it proves necessary. I do not know whether hon. Gentlemen realise that there are now nearly 260,000 people employed in Board of Trade factories in these areas and that, of 56·7 million square feet of factory space that we own, less than half of one per cent. is unoccupied at the moment. In all, a further 2½ million square feet is in the course of construction. Heaven knows where the people of Scotland and other areas would have been without these factories, which are as good an argument for public ownership as they are for a really active distribution of industry policy.
We have also extended widely in the past year the existing development districts so as to cover all coalmining areas with serious closure problems. The development districts now include all the main industrial areas of South Wales, the North-East Coast, Scotland and Cumberland. All existing Local Employment Act powers and benefits are now in force in these wider areas in advance of the still further extensions of the areas proposed in the White Paper.
The enlargement of the development areas that we have already made is enabling us both to use the existing industrial estates for proper development and to proceed with new ones. Publicly-owned industrial estates, I believe, will prove to be one of the most successful instruments for the development of these areas. The previous Government did great harm to development in South Wales, in particular by chopping it up into separate development districts and excluding every one of the four major Government-owned industrial estates from the districts, thus checking and hampering their growth. We have already put them all back, and proper development will now go forward.

Mr. Donald Box: Will the right hon. Gentleman explain, after


all the details that he has given us, why unemployment has risen consistently in Wales in the last few months?

Mr. Jay: I am going to come to the unemployment figures in a moment. They rose until a short time ago for the very reason that I have just mentioned, that so many of the areas had been de-scheduled by the previous Government. We shall also stop the sale of publicly-owned factories and land carried out by the previous Government, unless there is some very special reason.
We also propose to establish at Llantrisant a major new group site in easy travelling distance from the Rhondda and other coal valleys, which I hope will grow in time into a major new estate. Other large-scale new estates are now being constructed at Bellshill in the Lanarkshire coalfield and on South Teeside. We are also acquiring land at Falkirk, at Cummock (Ayrshire) and at Brandon and Byshottles (Durham) for industrial development. At Kirkby, near Liverpool, with the help of the Liverpool Corporation we are purchasing a 100-acre site which will be developed as a major new industrial estate for Merseyside as quickly as the necessary planning arrangements can be made.
Thanks to all these efforts and new developments, unemployment is falling in nearly all these once under-developed areas, and I am now going to give the hon. Member for Cardiff, North (Mr. Box) the figures about which he was asking. Because we deliberately excluded development districts for the postponement of capital schemes last summer, this recovery has actually occurred in a period of general restraint which in all previous cases brought higher unemployment to them.
In the development districts in Scotland, unemployment has dropped between January, 1965, and January, 1966, from 4·2 per cent. to 3·6 per cent., in the North-East from 3·3 per cent. to 2·8 per cent. and in Merseyside from 3·5 per cent. to 2·6 per cent., the latter being the lowest January figure for many years on Merseyside. In the development districts in Wales, the fall was from 4·7 per cent. to 3·8 per cent.

Mr. Michael Noble: I appreciate the care with which the right hon. Gentleman has given those figures to the

House, but they are not very relevant to the debate. Can the right hon. Gentleman explain to the House why, when this White Paper came out, the Chairman of the Highland Development Board said that it would make his task very much more difficult? This is the problem which we are debating today.

Mr. Jay: If the right hon. Gentleman thinks that employment and unemployment are irrelevant to this debate he has a weird conception of things. I assure him that the whole area in which the Highland Development Board operates will be a development area under these proposals.
I have also recently discussed the pit closure problem in detail on the spot both in Scotland and in Wales to ensure that where we have not done enough yet to bring in new employment, further development will be encouraged.
This much we have achieved already, and without new statutory powers. We now mean to do even better if the House approves of the more ambitious policy and wider powers enshrined in this White Paper and in the proposed new legislation. I am confident that if the efforts of the last 15 months are pushed relentlessly forward on this front for another five years, and the new powers we propose are granted, the old evil of depressed or under-employed areas in this country can be overcome for good and all.
We now propose still larger and more continuous development areas. This has been consistently urged by all of us on this side of the House ever since the previous Government broke up the old continuous areas by the Local Employment Act, and all practical experience has proved us right. We cannot do this job properly, or make any sense of industrial or any other kind of development, if the development areas are broken up into dots and stripes. It was utterly absurd, for instance, to exclude all four industrial estates in South Wales from the development districts.
We now propose also a much wider criterion for the scheduling of the areas. The legislation will ensure that migration, depopulation, and all other such relevant factors will be weighed in the balance, as well as unemployment—and I hope that that will be acceptable to the right hon. Gentleman—but we must be careful,


nevertheless, to see that the question of employment and unemployment remain one of the main criteria, since the full employment of our economic resources must stand as the main justification for the whole of this policy. The wider choice of areas is also likely to mean a greater discretion for the Board of Trade to use I.D.C.s so as to ensure that the neediest districts within the development areas are not bypassed, and that large industrial schemes are located where the manpower exists.
The new investment grant of 40 per cent. for plant and machinery in the new development areas will, I believe, prove a powerful incentive, and will overcome any disinclination which firms may have to develop these areas. When right hon. Gentlemen opposite argue that the new incentive will be less effective than the old in the developing areas, they will find that this is certainly not the view taken by people outside the areas, nor, indeed, by a number of industrialists either. This 40 per cent. grant will be paid to the firm on replacement machinery as well as expansion and new projects, whether or not the effect of the investment is to provide employment.
The building grant in the development areas will naturally continue to depend on proof of substantial new employment, and there will be a discretion to make a grant of 35 per cent., instead of 25 per cent., where a firm shows that it has incurred special expenses in making a move. In the normal case a firm developing in these areas will receive more help in terms of discounted cash flow than under the old system, and the margin of advantage to the development area firm will be greater than it was either under the Corporation Tax system of the past year, or under the previous Income Tax and Profits Tax system.
In arguing their Amendment, and in their speeches this afternoon—in particular the right hon. Member for Altrincham and Sale (Mr. Barber)—in seeking to show that the development areas will get less advantage than under the previous Government, right hon. Gentlemen opposite have forgotten four vital points in the argument. First, that it is discounted cash flow which counts in these matters nowadays; secondly, that even on a cash recovery basis we

must take the whole life of the plant and not the first year; thirdly, that these grants—and the right hon. Gentleman did not seem to have noticed this at all—apply to replacement, which the old Board of Trade grant did not and, fourthly, that the new grants will quickly assist firms starting up new ventures and not yet making profits—which was not true either of free depreciation or the investment allowance.
Therefore, whether one looks at the question on the basis of the total cash recoveries over the life of the asset or at the discounted value of these recoveries, the margin of incentive to invest in a development area will be greater under the new scheme than before. This is true—it is rather complicated, unfortunately—even if we assume that a firm was able to get the maximum benefit out of the old system, earned sufficient profits to take the full value of both the investment allowance and free depreciation straightaway, and that all its plant and machinery was eligible for free depreciation and for the 10 per cent. grant. It is also true even compared with the pre-Corporation Tax system.
As to the non-development area firms, the truth is that a firm which gets a 20 per cent. grant will get the same total cash recovery as it would under the old system, even if the Corporation Tax is set at the 40 per cent. rate selected as a hypothesis by the right hon. Gentleman this afternoon, and on a discounted cash basis the new system shows a positive advantage over the old.
The right hon. Gentleman's calculations outside the development areas neglected the fact that Corporation Tax reduced the tax paid by a firm on retained profits and, secondly, that the benefits to be received will accrue earlier under the new system than under the old. In addition to all this, the total sums paid out to industry as a whole under the new system over the first three years will be rather greater than under the old sysem. Therefore, it must be obvious to the House that firms throughout industry will get more.

Mr. Patrick Jenkin: We assume, therefore, that the right hon. Gentleman disagrees with the statement made by his hon. Friend the Member for Middlesbrough, West (Dr. Bray)—made in


response to an intervention from me—accepting absolutely that using the most modern techniques, and discounting cash flow, the overall position was not as good under the new investment grant as under the old.

Mr. Jay: I shall have to know the particulars of the case to which the hon. Member is referring before I can say whether or not I agree. I stand by what I have said this evening. I have expounded a general principle and have not dealt with individual cases, which depend on many things, such as the rate of profit.
Although, in our view, the new system of incentives will for these reasons be powerful, we must not fall into the error of supposing that firms cannot carry on without this special assistance. It is not long since there was no investment allowance at all, and not much longer since there was no initial allowance either. These new grants are special incentives to selective investment, and not necessities for industrial survival. The service industries in development areas which do not qualify for the investment grant for machinery will nevertheless qualify both for the building grant of 25 per cent. or 35 per cent. and for the initial allowance, now raised from 10 per cent. to 30 per cent. These are substantial benefits, and it is absurd to argue that because the service industries have not been given all the same incentives as manufacturing industries, they are being somehow penalised.
The right hon. Member for Altrincham and Sale was also wrong in supposing that offices and hotels in development districts enjoyed free depreciation. Throughout this policy we have deliberately set out to be selective, because we want to see public money spent to the best purpose and not wasted.
First the scheme is selective between areas. I find it hard to believe that the party opposite will vote against that principle, since Parliament has now approved selective development areas for the past 21 years. Second, we are being selective between types of equipment. We are deliberately applying these incentives to industrial plant and machinery and not to cups and saucers in the canteen or furniture in the office, for which investment allowance was given under the previous Government. I am certain that

it was wasteful and foolish of them to give investment allowance for those items.
Third, we are being selective between industries. Here, I agree, we have to decide what we want to achieve. Is our aim just some formal fair shares between different businesses or is it the greatest encouragement possible to industrial progress and exports and the achievement of a balance of payments surplus? We have given an additional incentive in this scheme to manufacturing and extractive industry, not because we think that manufacturing and extractive industry, not because we think that manufacturing has some superior merit or virtue over services or distribution. That would be an absurd view. We have selected manufacture in this way because manufacture and extraction contribute a higher proportion of their output to exports or import saving than do the service trades.
About 25 per cent. of the output of manufacturing industry is exported today, whereas less than 10 per cent., of for instance, the hotel industry's earnings are in foreign exchange. That does not mean that the hotel industry's earnings are other than highly important. Of course they are important. But it means that we can get a quicker benefit to the balance of payments by concentrating these incentives now on the main exporting and import-saving industries. This decision is based on the conviction, which I am certain is correct, that the first aim of the Government today must be to rescue this country from the state of international insolvency in which right hon. Gentlemen opposite left it.
In those three senses, we shall discriminate, but we shall not discriminate between firms on any other grounds in the grants for plant and machinery. These will be automatic if the firm and process qualify and we are confident that, after the initial period, these grants can be paid in less time and with fewer formalities than were inevitable with the Local Employment Act grants because—I think the right hon. Gentleman did not realise this—the special criteria affecting employment were attached to those grants but will not be attached to these in future. The Board of Trade—

Mr. Timothy Kitson: Would not the right hon. Gentleman agree that the agricultural industry


can help our balance of payments position? Will he tell us where that industry stands on this?

Mr. Jay: There will be an equivalent scheme to be administered by the Minister of Agriculture for the agricultural industry.
The Board of Trade is now working out, in consultation with the C.B.I., the best way of making the administration of these grants as speedy and efficient as we can. I hope, also, that it will be possible to locate some of the offices of the Board of Trade operating this scheme in development areas, or, at any rate, a good distance from London.
In our view, the certainty and simplicity of these direct grants will prove a greater incentive to modernisation than the uncertain and not easily calculated investment allowance. The new grants will not depend on future rates of profit or taxation and will thus assist a new and pioneering venture as well as an established firm. There is all too much evidence that many firms were uninfluenced by the investment allowance. In the C.B.I.'s inquiry, which the right hon. Member for Altrincham and Sale, quoted a high ratio of firms answering—24 per cent.—although they would naturally have preferred free depreciation, which would have been much too costly, opted for cash grants even at the level of 15 per cent., whereas we are introducing 20 per cent.
Industry has repeatedly asked for more certain and speedy payments and we have decided in this scheme to give them. It must be better to concentrate these payments on plant and machinery than to spread them over carpets, cutlery, curtains, cups and saucers and so on. Nevertheless, all the non-qualifying forms of equipment will receive the initial allowance, raised from 10 per cent. to 30 per cent. and on any sensible view that seems adequate and reasonable.
In all this, however, I do not believe that we shall have done all that a Government can do and need to do to promote industrial advance, in the development areas or outside, if we are content with investment grants and our existing powers. We need some public body, such as almost every other country has, to supply equity as well as loan capital.

B.O.T.A.C. has done extremely valuable work in the development districts, but its work is confined to helping projects providing employment in development districts and has hitherto been confined also to fixed interest lending.
The previous Government—and hon. Gentlemen opposite seem to forget this—found in a whole series of cases that they had to improvise special methods of lending public money to private industry—for example, the Fort William paper and pulp mill and the Ravenscraig and Newport strip mill. We have found the same in the case of Fairfields—which, I gather hon. Gentlemen opposite would have allowed to close down despite its modern equipment and full order book.
That, together with the need for reorganisation in many industries, is the case for the new I.R.C. If it were the case that the I.C.F.C. and the F.C.I. were sufficient, the previous Government would never have had to think up special schemes in such cases as the Fort William mill and the others I have mentioned—not to mention the cotton industry, which required a special Act of Parliament and the outlay of public money largely by grants and not even loans.
The purpose of the I.R.C. will be to assist and encourage industry. I have found that there are plenty of candidates coming forward for B.O.T.A.C., which will, of course, continue its work in the development areas. And if this were not to assist industry it is hardly likely that Sir Frank Kearton would have agreed to act as Chairman.
When the Second Reading of the Distribution of Industry Bill was debated in the House in 1945 a number of Conservatives opposed it. If hon. Gentlemen opposite vote against the White Paper tonight they will be voting against the continuation or the improvement of the Local Government Act powers. They will be voting for the extinction of the present powers, because they expire by their own legislation next year unless replaced. I do not believe that the people of Scotland, Wales, the North and West will thank hon. Gentlemen opposite for that and, therefore, I ask the House to approve the wider powers which we now propose as being essential to the prosperity of these regions and to the economic progress of the whole nation.

Question put, That the words proposed to be left out stand part of the Question:

The House divided: Ayes 298, Noes 279.

Division No. 26.]
AYES
[9.59 p.m.


Abse, Leo
Floud, Bernard
McBride, Neil


Albu, Austen
Foley, Maurice
McCann, J.


Allaun, Frank (Salford, E.)
Foot, Sir Dingle (Ipswich)
MacColl, James


Alldritt, Walter
Foot, Michael (Ebbw Vale)
MacDermot, Niall


Allen, Scholefield (Crews)
Ford, Ben
McGuire, Michael


Armstrong, Ernest
Fraser, Rt. Hn. Tom (Hamilton)
McInnes, James


Atkinson, Norman
Freeson, Reginald
McKay, Mrs. Margaret


Bacon, Rt. Hn. Alice
Galpern, Sir Myer
Mackenzie, Alasdair (Ross &amp; Crom'ty)


Bagier, Gordon A. T.
Garrett, W. E.
Mackenzie, Gregor (Ruthergien)


Barnett, Joel
Garrow, Alex
Mackio, John (Enfield, E.)


Baxter, William
Ginsburg, David
McLeavy, Frank


Beaney, Alan
Gourlay, Harry
MacMillan, Malcolm


Bellenger, Rt. Hn. F. J.
Greenwood, Rt. Hn. Anthony
McNamara, Kevin


Bence, Cyril
Gregory, Arnold
Mahon, Peter (Preston, S.)


Benn, Rt. Hn. Anthony Wedgwood
Grey, Charles
Mahon, Simon (Bootle)


Bennett, J. (Glasgow, Bridgeton)
Griffiths, David (Rother Valley)
Mallalieu, E. L. (Brigg)


Bessell, Peter
Griffiths, Rt. Hn. James (Llanelly)
Mallalieu, J. P. W. (Huddersfield, E.)


Binns, John
Griffiths, Will (M'Chester, Exchange)
Manuel, Archie


Bishop, E. S.
Grimond, Rt. Hn. J.
Mapp, Charles


Blackburn, F.
Gunter, Rt. Hn. R. J.
Marsh, Richard


Blenkinsop, Arthur
Hale, Leslie
Mason, Roy


Boardman H.
Hamilton, James (Bothwell)
Mayhew, Christopher


Boston, Terence
Hamilton, William (West Fife)
Mellish, Robert


Bottomley, Rt. Hn. Arthur
Hamling, William (Woolwich, W.)
Mendel son, J. J.


Bowden, Rt. Hn. H. W. (Leics, S. W.)
Hannan, William
Mikardo, Ian


Boyden, James
Harper, Joseph
Millan, Bruce


Braddock, Mrs. E. M.
Harrison, Walter (Wakefield)
Miller, Dr. M. S.


Bray, Dr. Jeremy
Hattersley, Roy
Milne, Edward (Blyth)


Broughton, Dr. A. D. D.
Hazell, Bert
Molloy, William


Brown, Rt. Hn. George (Belper)
Healey, Rt. Hn. Denis
Monslow, Walter


Brown, Hugh D. (Glasgow, Provan)
Heffer, Eric S.
Morris, Alfred (Wythenshawe)


Brown, R. W. (Shoreditch &amp; Fbury)
Herbison, Rt. Hn. Margaret
Morris, Charles (Openshaw)


Buchan, Norman (Renfrewshire, W.)
Hobden, Dennis (Brighton, K'town)
Morris, John (Aberavon)


Buchanan, Richard
Holman, Percy
Mulley, Rt. Hn. Frederick(SheffieldPk)


Butler, Herbert (Hackney, C.)
Hooson, H. E.
Murray, Albert


Butler, Mrs. Joyce (Wood Green)
Horner, John
Neal, Harold


Callaghan, Rt. Hn. James
Houghton, Rt. Hn. Douglas
Newens, Stan


Carmichael, Neil
Howarth, Harry (Wellingborough)
Noel-Baker, Francis (Swindon)


Carter-Jones, Lewis
Howarth, Robert L. (Bolton, E.)
Noel-Baker, Rt. Hn. Philip(Derby, S.)


Castle, Rt. Hn. Barbara
Howell, Denis (Small Heath)
Norwood, Christopher


Chapman, Donald
Howie, W.
Oakes, Gordon


Coleman, Donald
Hoy, James
Ogden, Eric


Conlan, Bernard
Hughes, Cledwyn (Anglesey)
O'Malley, Brian


Corbet, Mrs. Freda
Hughes, Hector (Aberdeen, N.)
Oram, Albert E. (E. Ham, S.)


Cousins, Rt. Hn. Frank
Hunter, Adam (Dunfermline)
Orbach, Maurice


Craddock, George (Bradford, S.)
Hunter, A. E. (Feltham)
Orme, Stanley


Crawshaw, Richard
Hynd, H. (Accrington)
Oswald, Thomas


Cronin, John
Hynd, John (Attercliffe)
Owen, Will


Crosland, Rt. Hn. Anthony
Jackson, Colin
Padley, Walter


Cullen, Mrs. Alice
Janner, Sir Barnett
Page, Derek (King's Lynn)


Dalyell, Tam
Jay, Rt. Hn. Douglas
Paget, R. T.


Darling, George
Jeger, George (Goole)
Palmer, Arthur


Davies, G. Elfed (Rhondda, E.)
Jeger, Mrs. Lena (H'b'n &amp; St.P'cras, S.)
Pannell, Rt. Hn. Charles


Davies, Harold (Leek)
Jenkins, Hugh (Putney)
Pargiter, G. A.


Davies, Ifor (Gower)
Jenkins, Rt. Hn. Roy (Stechford)
Park, Trevor (Derbyshire, S. E.)


Davies, S. O (Merthyr)
Johnson, Carol (Lewisham, S.)
Parker, John


de Freitas, Sir Geoffrey
Johnson, James (K'ston-on-Hull, W.)
Pavitt, Laurence


Delargy, Hugh
Johnston, Russell (Inverness)
Pearson, Arthur (Pontypridd)


Dell, Edmund
Jones, Dan (Burnley)
Peart, Rt. Hn. Fred


Diamond, Rt. Hn. John
Jones, Rt. Hn. Sir Elwyn(W. Ham, S.)
Pentland, Norman


Doig, Peter
Jones, J. Idwal (Wrexham)
Perry, Ernest G.


Donnelly, Desmond
Jones, T. W. (Merioneth)
Popplewell, Ernest


Driberg, Tom
Kelley, Richard
Prentice, R. E.


Duffy, Dr. A. E, P.
Kenyon, Clifford
Price, J. T. (Westhoughton)


Dunn, James A.
Kerr, Mrs. Anne (R'ter &amp; Chatham)
Probert, Arthur


Dunnett, Jack
Kerr, Dr. David (W'worth, Central)
Pursey, Cmdr. Harry


Edelman, Maurice
Leadbitter, Ted
Randall, Harry


Edwards, Rt. Hn. Nets (Caerphilly)
Ledger, Ron
Rankin, John


Edwards, Robert (Bilston)
Lee, Rt. Hn. Frederick (Newton)
Redhead, Edward


Ennals, David
Lee, Miss Jennie (Cannock)
Rees, Merlyn


Ensor, David
Lever, Harold (Cheetham)
Reynolds, G. W.


Evans, Albert (Islington, S. W.)
Lever, L. M. (Ardwick)
Rhodes, Geoffrey


Evans, Ioan (Birmingham, Yardley)
Lewis, Arthur (West Ham, N.)
Richard, Ivor


Fernyhough, E.
Lewis, Ron (Carlisle)
Roberts, Albert (Normanton)


Finch, Harold (Bedwellty)
Lipton, Marcus
Roberts, Goronwy (Caernarvon)


Fitch, Alan (Wigan)
Lomas, Kenneth
Robertson, John (Paisley)


Fletcher, Sir Eric (Islington, E.)
Loughlin, Charles
Robinson, Rt. Hn. K.(St. Pancras, N.)


Fletcher, Ted (Darlington)
Lubbock, Eric
Rodgers, William (Stockton)


Fletcher, Raymond (Ilkeston)
Mabon, Dr. J. Dickson
Rogers, George (Kensington, N.)




Rose, Paul B.
Stones, William
Weitzman, David


Ross, Rt. Hn. William
Strauss, Rt. Hn. G. R. (Vauxhall)
Wellbeloved, James


Rowland, Christopher
Stross, Sir Barnett(Stoke-on-Trent, C.)
Wells, William (Walsall, N.)


Sheldon, Robert
Summerskill, Hn. Dr. Shirley
White, Mrs. Eirene


Shin well, Rt. Hn. E.
Swain, Thomas
Whitlock, William


Shore, Peter (Stepney)
Swingler, Stephen
Wigg, Rt. Hn. George


Short, Rt. Hn. E. (N'c'tle-on-Tyne, C.)
Symonds, J. B.
Wilkins, W. A.


Short, Mrs. Renée (W'hampton, N. E.)
Taverne, Dick
Willey, Rt. Hn. Frederick


Silkin, John (Deptford)
Taylor, Bernard (Mansfield)
Williams, Alan (Swansea, W.)


Silkin, S. C. (Camberwell, Dulwich)
Thomas, Iorwerth (Rhondda, W.)
Williams, Mrs. Shirley (Hitchin)


Silverman, Sydney (Nelson)
Thomson, George (Dundee, E.)
Williams, W. T. (Warrington)


Skeffington, Arthur
Thornton, Ernest
Willis, George (Edinburgh, E.)


Slater, Mrs. Harriet (Stoke, N.)
Thorpe, Jeremy
Wilson, Rt. Hn. Harold (Huyton)


Slater, Joseph (Sedgefield)
Tuck, Raphael
Wilson, William (Coventry, S.)


Small, William
Urwin, T. W.
Woodburn, Rt. Hn. A.


Snow, Julian
Varley, Eric G.
Woof, Robert


Soskice, Rt. Hn. Sir Frank
Wainwright, Edwin
Wyatt, Woodrow


Spriggs, Leslie
Walker, Harold (Doncaster)
Yates, Victor (Ladywood)


Steel, David (Roxburgh)
Wallace, George
Zilliacus, K.


Steele, Thomas (Dunbartonshire, W.)
Warbey, William



Stonehouse, John
Watkins, Tudor
TELLERS FOR THE AYES:




Mr. Sydney Irving and Mr. Lawson.




NOES


Agnew, Commander Sir Peter
Currie, G. B. H.
Heald, Rt. Hn. Sir Lionel


Alison, Michael (Barkston Ash)
Dalkeith, Earl of
Heath, Rt. Hn. Edward


Allan, Robert (Paddington, S.)
Dance, James
Hendry, Forbes


Allason, James (Hemel Hempstead)
Davies, Dr. Wyndham (Perry Barr)
Higgins, Terence L.


Amery, Rt. Hn. Julian
d'Avigdor-Goldsmid, Sir Henry
Hiley, Joseph


Anstruther-Gray, Rt. Hn. Sir W.
Dean, Paul
Hill, J. E. B. (S. Norfolk)


Astor, John
Deedes, Rt. Hon. W. F.
Hirst, Geoffrey


Atkins, Humphrey
Digby, Simon Wingfield
Hobson, Rt. Hn. Sir John


Awdry, Daniel
Dodds-Parker, Douglas
Hogg, Rt. Hn. Quintin


Baker, W. H. K.
Doughty, Charles
Hopkins, Alan


Barber, Rt. Hn. Anthony
Drayson, G. B.
Hordern, Peter


Barlow, Sir John
du Cann, Rt. Hn. Edward
Hornby, Richard


Beamish, Col. Sir Tufton
Eden, Sir John
Hornsby-Smith, Rt. Hn. Dame P.


Bennett, Sir Frederic (Torquay)
Elliot, Capt. Walter (Carshalton)
Howard, Hn. G. R. (St. Ives)


Berkeley, Humphry
Elliott, R. W. (N'c'tle-upon-Tyne, N.)
Howe, Geoffrey (Bebington)


Berry, Hn. Anthony
Emery, Peter
Hunt, John (Bromley)


Biffen, John
Errington, Sir Eric
Hutchison, Michael Clark


Biggs-Davison, John
Eyre, Reginald
Irvine, Bryant Godman (Rye)


Bingham, R. M.
Farr, John
Jenkin, Patrick (Woodford)


Birch, Rt. Hn. Nigel
Fell, Anthony
Johnson Smith, G. (East Grinstead)


Black, Sir Cyril
Fisher, Nigel
Jones, Arthur (Northants, S.)


Blaker, Peter
Fletcher-Cooke, Charles (Darwen)
Jopling, Michael


Bossom, Sir Clive
Fletcher-Cooke, Sir John (S'pton)
Joseph, Rt. Hn. Sir Keith


Box, Donald
Forrest, George
Kaberry, Sir Donald


Braine, Bernard
Foster, Sir John
Kerby, Capt. Henry


Brinton, Sir Tatton
Fraser, Rt. Hn. Hugh(St'fford &amp; Stone)
Kerr, Sir Hamilton (Cambridge)


Bromley-Davenport, Lt.-Col. Sir Walter
Fraser, Ian (Plymouth, Sutton)
Kershaw, Anthony


Brooke, Rt. Hn. Henry
Gammans, Lady
Kiffedder, James A.


Brown, Sir Edward (Bath)
Gardner, Edward
Kimball, Marcus


Bruce-Gardyne, J.
Gibson-Watt, David
King, Evelyn (Dorset, S.)


Bryan, Paul
Giles, Rear-Admiral Morgan
Kirk, Peter


Buchanan-Smith, Alick
Gilmour, Ian (Norfolk, Central)
Kitson, Timothy


Buck, Antony
Gilmour, Sir John (East Fife)
Lagden, Godfrey


Bullus, Sir Eric
Glover, Sir Douglas
Lambton, Viscount


Burden, F. A.
Glyn, Sir Richard
Lancaster, Col. C. G.


Buxton, Ronald
Godber, Rt. Hn. J. B.
Langford-Holt, Sir John


Campbell, Gordon
Goodhart, Philip
Legge-Bourke, Sir Harry


Carlisle, Mark
Goodhew, Victor
Lewis, Kenneth (Rutland)


Carr, Rt. Hn. Robert
Gower, Raymond
Litchfield, Capt. John


Cary, Sir Robert
Grant, Anthony
Lloyd, Rt. Hn. Geoffrey(Sut'nC'dfield)


Channon, H. P. G.
Grant-Ferris, R.
Lloyd, Ian (P'tsm'th, Langstone)


Chataway, Christopher
Gresham Cooke, R.
Longbottom, Charles


Chichester-Clark, R.
Grieve, Percy
Longden, Gilbert


Clark, Henry (Antrim, N.)
Griffiths, Eldon (Bury St. Edmunds)
Loveys, W. H.


Clark, William (Nottingham, S.)
Griffiths, Peter (Smethwick)
Lucas, Sir Jocelyn


Clarke, Brig. Terence(Portsmth, W.)
Gurden, Harold
McAdden, Sir Stephen


Cole, Norman
Hall, John (Wycombe)
MacArthur, Ian


Cooke, Robert
Hall-Davis, A. G. F.
Maclean, Sir Fitzroy


Cooper, A. E.
Hamilton, Marquess of (Fermanagh)
Macleod, Rt. Hn. Iain


Cooper-Key, Sir Neill
Hamilton, M. (Salisbury)
McMaster, Stanley


Cordle, John
Harris, Frederic (Croydon, N. W.)
McNair-Wilson, Patrick


Corfield, F. V.
Harris, Reader (Heston)
Maddan, Martin


Costain, A. P.
Harrison, Brian (Maldon)
Maginnis, John E.


Courtney, Cdr. Anthony
Harrison, Col. Sir Harwood (Eye)
Maitland, Sir John


Craddock, Sir Beresford (Spelthorne)
Harvey, Sir Arthur Vere (Macclesf'd)
Marples, Rt. Hn. Ernest


Crawley, Aidan
Harvey, John (Walthamstow, E.)
Marten, Neil


Crosthwaite-Eyre, Col. Sir Oliver
Harvie Anderson, Miss
Mathew, Robert


Crowder, F. P.
Hastings, Stephen
Maude, Angus


Cunningham, Sir Knox
Hawkins, Paul
Maudling, Rt. Hn. Reginald


Curran, Charles
Hay, John
Mawby, Ray




Maxwell-Hyslop, R. J.
Quennell, Miss J. M.
Thatcher, Mrs. Margaret


Maydon, Lt. Cmdr. S. L. C.
Ramsden, Rt. Hn. James
Thomas, Sir Leslie (Canterbury)


Meyer, Sir Anthony
Rawlinson, Rt. Hn. Sir Peter
Thomas, Rt. Hn. Peter (Conway)


Mills, Peter (Torrington)
Redmayne, Rt. Hn. Sir Martin
Thompson, Sir Richard (Croydon, S.)


Mills, Stratton (Belfast, N.)
Rees-Davies, W. R.
Thorneycroft, Rt. Hn. Peter


Miscampbell, Norman
Renton, Rt. Hn. Sir David
Tiley, Arthur (Bradford, W.)


Mitchell, David
Ridsdale, Julian
Turton, Rt. Hn. R. H.


Monro, Hector
Roberts, Sir Peter (Heeley)
Tweedsmuir, Lady


More, Jasper
Robson Brown, Sir William
van Straubenzee, W. R.


Morgan, W. G.
Rodgers, Sir John (Sevenoaks)
Vaughan-Morgan, Rt. Hn. Sir John


Morrison, Charles (Devizes)
Roots, William
Vickers, Dame Joan


Mott-Radclyffe, Sir Charles
Royle, Anthony
Walder, David (High Peak)


Munro-Lucas-Tooth, Sir Hugh
St. John-Stevas, Norman
Walker, Peter (Worcester)


Murton, Oscar
Scott-Hopkins, James
Walker-Smith, Rt. Hn. Sir Derek


Neave, Airey
Sharples, Richard
Wall, Patrick


Nicholls, Sir Harmar
Shepherd, William
Walters, Dennis


Nicholson, Sir Godfrey
Sinclair, Sir George
Ward, Dame Irene


Noble, Rt. Hn. Michael
Smith, Dudley (Br'ntf'd &amp; Chiswick)
Weatherill, Bernard


Nugent, Rt. Hn. Sir Richard
Smith, John
Webster, David


Onslow, Cranley
Smyth, Rt. Hn. Brig. Sir John
Wells, John (Maidstone)


Orr, Capt. L. P. S.
Soames, Rt. Hn. Christopher
Whitelaw, William


Orr-Ewing, Sir Ian
Spearman, Sir Alexander
Williams, Sir Rolf Dudley (Exeter)


Osborn, John (Hallam)
Stainton, Keith
Wilson, Geoffrey (Truro)


Page, John (Harrow, W.)
Stanley, Hn. Richard
Wise, A. R.


Page, R. Graham (Crosby)
Stodart, Anthony
Wolrige-Gordon, Patrick


Pearson, Sir Frank (Clitheroe)
Stoddart-Scott, Col. Sir Malcolm
Wood, Rt. Hn. Richard


Peel, John
Studholme, Sir Henry
Woodhouse, Hn. Christopher


Percival, Ian
Summers, Sir Spencer
Woodnutt, Mark


Peyton, John
Talbot, John E.
Wylie, N. R.


Pickthorn, Rt. Hn. Sir Kenneth
Taylor, Sir Charles (Eastbourne)
Yates, William (The Wrekin)


Pounder, Rafton
Taylor, Edward M. (G'gow, Cathcart)
Younger, Hn. George


Powell, Rt. Hn. J. Enoch
Taylor, Frank (Moss Side)



Price, David (Eastleigh)
Teeling, Sir William
TELLERS FOR THE NOES:


Prior, J. M. L.
Temple, John M.
Mr. McLaren and Mr. Pym.

Main Question put:—

The house divided: Ayes 293, Noes 279.

Division No. 27.]
AYES
[10.13 p.m.


Abse, Leo
Craddock, George (Bradford, S.)
Carrow, A.


Albu, Austen
Crawshaw, Richard
Ginsburg, David


Allaun, Frank (Salford, E.)
Cronin, John
Gourlay, Harry


Aldritt, Walter
Crosland, Rt. Hn. Anthony
Greenwood, Rt. Hn. Anthony


Armstrong, Ernest
Cullen, Mrs. Alice
Gregory, Arnold


Atkinson, Norman
Dalyell, Tam
Grey, Charles


Bacon, Rt. Hn. Alice
Darling, George
Griffiths, David (Rother Valley)


Bagier, Gordon A. T.
Davies, G. Elfed (Rhondda, E.)
Griffiths, Rt. Hn. James (Llanelly)


Barnett, Joel
Davies, Harold (Leek)
Griffiths, Will (M'chester, Exchange)


Baxter, William
Davies, Ifor (Gower)
Grimond, Rt. Hn. J.


Beaney, Alan
Davies, S. O. (Merthyr)
Gunter, Rt. Hn. R. J.


Bellenger, Rt. Hn. F. J.
de Freitas, Sir Geoffrey
Hale, Leslie


Bence, Cyril
Delargy, Hugh
Hamilton, James (Bothwell)


Benn, Rt. Hn. Anthony Wedgwood
Dell, Edmund
Hamilton, William (West Fife)


Bennett, J. (Glasgow, Bridgeton)
Diamond, Rt. Hn. John
Hamling, William (Woolwich, W.)


Bessell, Peter
Doig, Peter
Hannan, William


Binns, John
Donnelly, Desmond
Harper, Joseph


Bishop, E. S.
Driberg, Tom
Harrison, Walter (Wakefield)


Blackburn, F.
Duffy, Dr. A. E. P.
Hattersley, Roy


Blenkinsop, Arthur
Dunn, James A.
Hazell, Bert


Boardman, H.
Dunnett, Jack
Healey, Rt. Hn. Denis


Boston, Terence
Edelman, Maurice
Heffer, Eric S.


Bottomley, Rt. Hn. Arthur
Edwards, Rt. Hn. Ness (Caerphilly)
Harbison, Rt. Hn. Margaret


Bowden, Rt. Hn. H. W. (Leics. S. W.)
Edwards, Robert (Bilston)
Hobden, Dennis (Brighton, K'town)


Boyden, James
Ennals, David
Holman, Percy


Braddock, Mrs. E. M.
Ensor, David
Horner, John


Bray, Dr. Jeremy
Evans, Albert (Islington, S. W.)
Houghton, Rt. Hn. Douglas


Broughton, Dr. A. D. D.
Evans, Ioan (Birmingham, Yardley)
Howarth, Harry (Wellingborough)


Brown, Rt. Hon. George (Belper)
Fernyhough, E.
Howarth, Robert L. (Bolton, E.)


Brown, Hugh D. (Glasgow, Provan)
Finch, Harold (Bedwellty)
Howell, Denis (Small Heath)


Brown, R. W. (Shoreditch &amp; F'bury)
Fitch, Alan (Wigan)
Howie, w.


Buchan, Norman (Renfrewshire, W.)
Fletcher, Sir Eric (Islington, E.)
Hoy, James


Buchanan, Richard
Fletcher, Ted (Darlington)
Hughes, Cledwyn (Anglesey)


Butler, Herbert (Hackney, C.)
Fletcher, Raymond (Ilkeston)
Hughes, Hector (Aberdeen, N)


Butler, Mrs. Joyce (Wood Green)
Floud, Bernard
Hunter, Adam (Dunfermline)


Callaghan, Rt. Hn. James
Foley, Maurice
Hunter, A. E. (Feltham)


Carmichael, Neil
Foot, Sir Dingle (Ipswich)
Hynd, H. (Accrington)


Carter-Jones, Lewis
Foot, Michael (Ebbw Vale)
Hynd, John (Attercliffe)


Castle, Rt. Hn. Barbara
Ford, Ben
Jackson, Colin


Chapman, Donald
Fraser, Rt. Hn. Tom (Hamilton)
Janner, Sir Barnett


Coleman, Donald
Freeson, Reginald
Jay, Rt Hn. Douglas


Conlan, Bernard
Galpern, Sir Myer
Jeger, George (Goole)


Cousins, Rt. Hn. Frank
Garrett, W. E.
Jeger, Mrs. Lena (H'h'n&amp;St.P'cras S.)




Jenkins, Hugh (Putney)
Morris, Alfred (Wythenshawe)
Silkin, John (Deptford)


Jenkins, Rt. Hn. Roy (Stechford)
Morris, Charles (Openshaw)
Silkin, S. C. (Camberwell, Dulwich)


Johnson, Carol (Lewisham, S.)
Morris, John (Aberavon)
Silverman, Sydney (Nelson)


Johnson, James (K'ston-on-Hull, W.)
Mulley, Rt. Hn. Fredertck (Sheffield Pk)
Skeffington, Arthur


Johnston, Russell (Inverness)
Murray, Albert
Slater, Mrs. Harriet (Stoke, N.)


Jones, Dan (Burnley)
Neal, Harold
Slater, Joseph (Sedgefield)


Jones, Rt. Hn. Sir Elwyn(W. Ham, S.)
Newens, Stan
Small, William


Jones, J. Idwal (Wrexham)
Noel-Baker, Francis (Swindon)
Snow, Julian


Jones, T. W. (Merioneth)
Noel-Baker, Rt. Hn. Philip(Derbyb, S.)
Soskice, Rt. Hn. Sir Frank


Kelley, Richard
Norwood, Christopher
Spriggs, Lesile


Kenyon, Clifford
Oakes, Gordon
Steele, Thomas (Dunbartonshire, W.)


Kerr, Mrs. Anne (R'ter &amp; Chatham)
Ogden, Eric
Stonehouse, John


Kerr, Dr. David (W'worth, Central)
O'Malley, Brian
Stones, William


Leadbitter, Ted
Oram, Albert E. (E. Ham, S.)
Strauss, Rt. Hn. G. R. (Vauxhall)


Ledger, Ron
Orbach, Maurice
Stross, Sir Barnett(Stoke-on-Trent, C.)


Lee, Rt. Hon. Frederick (Newton)
Orme, Stanley
Summerskill, Hn. Dr. Shirley


Lee, Miss Jennie (Cannock)
Oswald, Thomas
Swain, Thomas


Lever, Harold (Cheetham)
Owen, Will
Swingler, Stephen


Lever, L. M. (Ardwick)
Padley, Walter
Symonds, J. B.


Lewis, Arthur (West Ham N.)
Page, Derek (King's Lynn)
Taverne, Dick


Lewis, Ron (Carlisle)
Paget, R. T.
Taylor, Bernard (Mansfield)


Lipton, Marcus
Palmer, Arthur
Thomas, Iorwerth (Rhondda, W.)


Lomas, Kenneth
Pannell, Rt. Hn. Charles
Thomson, George (Dundee, E.)


Loughlin, Charles
Pargiter, G. A.
Thornton, Ernest


Lubbock, Eric
Park, Trevor (Derbyshire, S.E.)
Thorpe, Jeremy


Mabon, Dr. J. Dickson
Parker, John
Tuck, Raphael


McBride, Neil
Pavitt, Laurence
Urwin, T. W.


McCann, J.
Pearson, Arthur (Pontypridd)
Varley, Eric G.


MacColl, James
Peart, Rt. Hn. Fred
Wainwright, Edwin


MacDermot, Niall
Pentland, Norman
Walker, Harold (Doncaster)


McGuire, Michael
Perry, Ernest G.
Wallace, George


McInnes, James
Popplewell, Ernest
Warbey, William


McKay, Mrs. Margaret
Prentice, R. E.
Watkins, Tudor


Mackenzie, Alasdair (Ross &amp; Crom'ty)
Price, J. T. (Westhoughton)
Weitzman, David


Mackenzie, Gregor (Rutherglen)
Probert, Arthur
Wellbeloved, James


Mackie, John (Enfield, E.)
Pursey, Cmdr. Harry
Wells, William (Walsall, N.)


McLeavy, Frank
Randall, Harry
White, Mrs. Eirene


MacMillan, Malcolm
Rankin, John
Whitlock, William


McNamara, Kevin
Redhead, Edward
Wigg, Rt. Hn. George


Mahon, Peter (Preston, S.)
Rees, Merlyn
Wilkins, W. A.


Mahon, Simon (Bootle)
Reynolds, G. W.
Willey, Rt. Hn. Frederick


Mallalieu, E. L. (Brigg)
Rhodes, Geoffrey
Williams, Alan (Swansea, W.)


Mallalieu, J. P. W. (Huddersfield, E.)
Richard, Ivor
Williams, Mrs. Shirley (Hitchin)


Manuel, Archie
Roberts, Albert (Normanton)
Williams, W. T. (Warrington)


Mapp, Charles
Roberts, Goronwy (Caernarvon)
Willis, George (Edinburgh, E.)


Marsh, Richard
Robertson, John (Paisley)
Wilson, Rt. Hn. Harold (Huyton)


Mason, Roy
Robinson, Rt. Hn. K.(St. Pancras, N.)
Wilson, William (Coventry, S.)


Mayhew, Christopher
Rodgers, William (Stockton)
Woodburn, Rt. Hn. A.


Mellish, Robert
Rogers, George (Kensington, N.)
Woof, Robert


Mendelson, J. J.
Rose, Paul B.
Wyatt, Woodrow


Mikardo, Ian
Ross, Rt. Hn. William
Yates, Victor (Ladywood)


Millan, Bruce
Rowland, Christopher
Zilliacus, K.


Miller, Dr. M. S.
Sheldon, Robert



Milne, Edward (Blyth)
Shore, Peter (Stepney)



Molloy, William
Short, Rt. Hn. E. (N'c'tle-on-Tyne, C.)
TELLERS FOR THE AYES:


Monslow, Walter
Short, Mrs. Renée (W'hampton, N. E.)
Mr. Sydney Irving and Mr. Lawson




NOES


Agnew, Commander Sir Peter
Bromley-Davenport, Lt.-Col. Sir Walter
Costain, A. P.


Alison, Michael (Barkston Ash)
Brooke, Rt. Hn. Henry
Courtney, Cdr. Anthony


Allan, Robert (Paddington, S.)
Brown, Sir Edward (Bath)
Craddock, Sir Beresford (Spelthorne)


Allason, James (Hemel Hempstead)
Bruce-Gardyne, J.
Crawley, Aidan


Amery, Rt. Hn. Julian
Bryan, Paul
Crosthwaite-Eyre, Col. Sir Oliver


Anstruther-Gray, Rt. Hn. Sir W.
Buchanan-Smith, Alick
Crowder, F. P.


Astor, John
Buck, Antony
Cunningham, Sir Knox


Atkins, Humphrey
Bullus, Sir Eric
Curran, Charles


Awdry, Daniel
Burden, F. A.
Currie, G. B. H.


Baker, W. H. K.
Buxton, Ronald
Dalkeith, Earl of


Barber, Rt. Hn. Anthony
Campbell, Gordon
Dance, James


Barlow, Sir John
Carlisle, Mark
Davies, Dr. Wyndham (Perry Barr)


Beamish, Col. Sir Tufton
Carr, Rt. Hn. Robert
d'Avigdor-Goldsmid, Sir Henry


Bennett, Sir Frederic (Torquay)
Cary, Sir Robert
Dean, Paul


Berkeley, Humphrey
Channon, H. P. G.
Deedes, Rt. Hn. W. F.


Berry, Hn. Anthony
Chataway, Christopher
Digby, Simon Wingfield


Biffen, John
Chichester-Clark, R.
Dodds-Parker, Douglas


Biggs-Davison, John
Clark, Henry (Antrim, N.)
Doughty, Charles


Bingham, R. M.
Clark, William (Nottingham, S.)
Drayson, G. B.


Birch, Rt. Hn. Nigel
Clarke, Brig. Terence (Portsmth, W.)
du Cann, Rt. Hn. Edward


Black, Sir Cyril
Cole, Norman
Eden, Sir John


Blaker, Peter
Cooke, Robert
Elliot, Capt. Walter (Carshalton)


Bossom, Hn. Clive
Cooper, A. E.
Elliott, R. W. (N'c'tle-upon-Tyne, N.)


Box, Donald
Cooper-Key, Sir Neill
Emery, Peter


Brains, Bernard
Cordle, John
Errington, Sir Eric


Brinton, Sir Tatton
Corfield, F. V.
Eyre, Reginald




Farr, John
Kershaw, Anthony
Quennell, Miss J. M.


Fell, Anthony
Kilfedder, James A.
Ramsden, Rt. Hn. James


Fisher, Nigel
Kimball, Marcus
Rawlinson, Rt. Hn. Sir Peter


Fletcher-Cooke, Charles (Darwen)
King, Evelyn (Dorset, S.)
Redmayne, Rt. Hn. Sir Martin


Fletcher-Cooke, Sir John (S'pton)
Kirk, Peter
Rees-Davies, W. R.


Forrest, George
Kitson, Timothy
Renton, Rt. Hn. Sir David


Foster, Sir John
Lagden, Godfrey
Ridsdale, Julian


Fraser, Rt. Hn. Hugh (St'ffOrd &amp; Stone)
Lambton, Viscount
Roberts, Sir Peter (Heeley)


Fraser, Ian (Plymouth, Sutton)
Lancaster, Col. C. G.
Robson Brown, Sir William


Gammant, Lady
Langford-Holt, Sir John
Rodgers, Sir John (Sevenoaks)


Gardner, Edward
Legge-Bourke, Sir Harry
Roots, William


Gibson-Watt, David
Lewis, Kenneth (Rutland)
Royle, Anthony


Giles, Rear-Admiral Morgan
Litchfield, Capt. John
St. John-Stevas, Norman


Gilmour, Ian (Norfolk, Central)
Lloyd, Rt. Hn. Geoffrey (Sut'nC'dfield)
Scott-Hopkins, James


Gilmour, Sir John (East Fife)
Lloyd, Ian (P'tsm'th, Langstone)
Sharples, Richard


Glover, Sir Douglas
Longbottom, Charles
Shepherd, William


Glyn, Sir Richard
Longden, Gilbert
Sinclair, Sir George


Godber, Rt. Hn. J. B.
Loveys, Walter H.
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Goodhart, Philip
Lucas, Sir Jocelyn
Smith, John


Goodhew, Victor
McAdden, Sir Stephen
Smyth, Rt. Hn. Brig. Sir John


Gower, Raymond
MacArthur, Ian
Soames, Rt. Hn. Christopher


Grant, Anthony
Maclean, Sir Fitzroy
Spearman, Sir Alexander


Grant-Ferris, R.
Macleod, Rt Hn. Iain
Stainton, Keith


Gresham Cooke, R.
McMaster, Stanley
Stanley, Hn. Richard


Grieve, Percy
McNair-Wilson, Patrick
Stodart, Anthony


Griffiths, Eldon (Bury St. Edmunds)
Maddan, Martin
Stoddart-Scott, Col. Sir Malcolm


Griffiths, Peter (Smethwick)
Maginnls, John E.
Studholme, Sir Henry


Gurden, Harold
Maitland, Sir John
Summers, Sir Spencer


Hall, John (Wycombe)
Marples, Rt. Hn. Ernest
Talbot, John E.


Hall-Davis, A. G. F.
Marten, Neil
Taylor, Sir Charles (Eastbourne)


Hamilton, Marquess of (Fermanagh)
Mathew, Robert
Taylor, Edward M. (G'gow, Cathcart)


Hamilton, M. (Salisbury)
Maude, Angus
Taylor, Frank (Moss Side)


Harris, Frederic (Croydon, N. W.)
Maudling, Rt. Hn. Reginald
Teeling, Sir William


Harris, Reader (Heston)
Mawby, Ray
Temple, John M.


Harrison, Brian (Maldon)
Maxwell-Hyslop, R. J.
Thatcher, Mrs. Margaret


Harrison, Col. Sir Harwood (Eye)
Maydon, Lt.-Comdr. S. L. C.
Thomas, Sir Leslie (Canterbury)


Harvey, Sir Arthur Vere (Macclesf'd)
Meyer, Sir Anthony
Thomas, Rt. Hn. Peter (Conway)


Harvey, John (Walthamstow, E.)
Mills, Peter (Torrington)
Thompson, Sir Richard (Croydon, S.)


Harvie Anderson, Miss
Mills, Stratton (Belfast, N.)
Thorneycroft, Rt. Hn. Peter


Hastings, Stephen
Miscampbell, Norman
Tiley, Arthur (Bradford, W.)


Hawkins, Paul
Mitchell, David
Turton, Rt. Hn. R. H.


Hay, John
Monro, Hector
Tweedsmuir, Lady


Heald, Rt. Hn. Sir Lionel
More, Jasper
van Straubenzee, W. R.


Heath, Rt. Hn. Edward
Morgan, W. G.
Vaughan-Morgan, Rt. Hn. Sir John


Hendry, Forbes
Morrison, Charles (Devizes)
Vickers, Dame Joan


Higgins, Terence L.
Mott-Radclyffe, Sir Charles
Walder, David (High Peak)


Hiley, Joseph
Munro-Lucas-Tooth, Sir Hugh
Walker, Peter (Worcester)


Hill, J. E. B. (S. Norfolk)
Murton, Oscar
Walker-Smith, Rt. Hn. Sir Derek


Hirst, Geoffrey
Neave, Alrey
Wall, Patrick


Hobson, Rt. Hn. Sir John
Nicholls, Sir Harmar
Walters, Dennis


Hogg, Rt. Hn. Qlintin
Nicholson, Sir Godfrey
Ward, Dame Irene


Hopkins, Alan
Noble, Rt. Hn. Michael
Weatherill, Bernard


Hordern, Peter
Nugent, Rt. Hn. Sir Richard
Webster, David


Hornby, Richard
Onslow, Cranley
Wells, John (Maidstone)


Hornsby-Smith, Rt. Hn. Dame P.
Orr, Capt. L. P. S.
Whitelaw, William


Howard, Hn. G. R. (St. Ives)
Orr-Ewing, Sir Ian
Williams, Sir Rolf Dudley (Exeter)


Howe, Geoffrey (Bebington)
Osborn, John (Hallam)
Wilson, Geoffrey (Truro)


Hunt, John (Bromley)
Page, John (Harrow, W.)
Wise, A. R.


Hutchison, Michael Clark
Page, R. Graham (Crosby)
Wolrige-Gordon, Patrick


Irvine, Bryant Goodman (Rye)
Pearson, Sir Frank (Clitheroe)
Wood, Rt. Hn. Richard


Jenkin Patrick (Woodford)
Peel, John
Woodhouse, Hn. Christopher


Johnson Smith, G. (East Grinstead)
Percival, Ian
Woodnutt, Mark


Jones, Arthur (Northants, S.)
Peyton, John
Wylie, N. R.


Jopling, Michael
Pickthorn, Rt. Hn. Sir Kenneth
Yates, William (The Wrekin)


Joseph, Rt. Hn. Sir Keith
Pounder, Rafton
Younger, Hn. George


Kaberry, Sir Donald
Powell, Rt. Hn. J. Enoch



Kerby, Capt. Henry
Price, David (Eastleigh)
TELLERS FOR THE NOES:


Kerr, Sir Hamilton (Cambridge)
Prior, J. M. L.
Mr. McLaren and Mr. Pym.

Resolved,

That this House approves the proposals in Command Papers Nos. 2874 and 2889.

LOCAL GOVERNMENT BOUNDARIES (SOUTH WESTERN COUNTIES)

10.26 p.m.

Mr. Speaker: Before I call the hon. Member for Cornwall, North (Mr. Scott-Hopkins) to move the Prayer, it occurs to me that it might be convenient to take both Motions together. If that is the opinion of the House, so be it.

10.27 p.m.

Mr. James Scott-Hopkins: I beg to move,
That an humble Address be presented to Her Majesty, praying that the Cornwall and Devon (Broadwoodwidger) Order 1965 (S.I., 1965, No. 2087), dated 8th December, 1965, a copy of which was laid before this House on 17th December, be annulled.
It would be convenient if with this we also took the Motion,
That an humble Address be presented to Her Majesty, praying that the South Western Counties Order 1965 (S.I., 1965, No. 2086), dated 8th December 1965, a copy of which was laid before this House on 17th December, be annulled.
I shall address the majority of my remarks to the first Prayer.

Mr. Speaker: Order. I do not know whether I heard the hon. Gentleman aright, but I think that he moved the second Prayer. It is the first which he should have moved and with that can be taken the second.

Mr. Scott-Hopkins: I beg your pardon for doing so, Mr. Speaker. I moved the second, but in fact it makes no difference.

Mr. Speaker: It matters from the procedure point of view. The hon. Gentleman must move the first and we take the second with the first and not the first with the second.

Mr. Scott-Hopkins: In that case, Mr. Speaker, I beg to move,
That an humble Address be presented to Her Majesty, praying that the South Western Counties Order 1965 (S.I., 1965, No. 2086), dated 8th December, 1965, a copy of which was laid before this House on 17th December, be annulled.
The two Orders are interwoven, but it is the second to which I wish to address most of my remarks, and I have one or two queries about the first. The purpose of my praying against these Orders is not

that I disagree with them, but that there is no other way in which an hon. Member can raise matters of interest to many would-be constituents other than by a Prayer to annul an Order.
Certain matters require clarification, but they are purely of administrative detail and I will not weary the House with a long and impassioned speech. About 2,000 people are involved, 980 of them being transferred into Cornwall and 1,100 transferred from an existing rural district council which is being abolished into a completely new one with different conditions and different rates.
The first question which I put to the Parliamentary Secretary concerns the phrase "on the appointed day" which runs throughout the Order. I can see no way of telling when the appointed day will be or when the Minister will announce the appointed day. I thought that it would be on 1st February, but it was not. There is no indication in the Order of how one can discover what will be the appointed day. The first mention is on page 3 where I read,
on 1st January, 1966, and for all other purposes on the appointed day.

The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. James MacColl): I am not sure that the hon. Gentleman and I understand each other, because on page 3 is the statement:
'The appointed day' means 1st April 1966.

Mr. Scott-Hopkins: I wondered whether the Joint Parliamentary Secretary would say that, but on reading the Order several times in the last few days I interpreted it as meaning that 1st January was one of the appointed days for the purposes of Article 2(a) to 2(j) but that for other purposes there would be a further appointed day to be announced by the Minister. If the appointed day was 1st January, then we know where we stand. But perhaps the hon. Gentleman would check that point.
In Article 6 there is the phrase that the rural district council shall
liquidate all current liabilities incurred by them".
That refers to the rural district council of Broadwoodwidger, which is being dissolved. It may be that they will not


be able to liquidate all their current assets. What will then happen to the outstanding liabilities on the appointed day? If that were on 1st January, who met their current liabilities and what happened to the creditors?
Under Article 7, those who are being transferred into the Holsworthy rural district will be represented by six new councillors whereas those being transferred into the Launceston rural district will be represented by five rural district councillors. It is true that there is a difference of 180 between the numbers being transferred, but there are two complete villages being transferred to the Launceston R.D.C., and I feel that the Parliamentary Secretary should consider whether this increased representation is adequate. It might have been better to have six additional representatives on the Launceston R.D.C. instead of five. The number of people they will represent, including many young people not yet on the register, is considerable.
May I draw attention to the number of parish councillors and to the way in which that number will be decided? In Article 7(4) the number of parish councillors for the parish of Werrington is to be decreased from nine to six. I do not know whether any exception will be taken to this. Under Article 8 the existing councillors will have to resign on the appointed day and there will be new elections when the registers have been completed. When does the Parliamentary Secretary expect this to be? It hinges on the appointed day, whenever that is, and the period which will elapse between the appointed day and the elections. The provision for the retirement of parish councillors and the election of rural district and parish councillors is not on all fours with the treatment being given to the representatives on the water board which is outlined on page 14. All the representatives of the rural district council are being compulsorily retired. One might think this is a strange way to go about it. It does not seem to be on all fours with the provisions in paragraphs 7 and 8 under which councillors who are being transferred keep their seats. There does not seem to be equality of treatment, and perhaps the Joint Parliamentary Secretary will deal with the point.
Article 10(4) of Statutory Instrument No. 2087 deals with probationers. I should like an assurance about the man on probation. What is his exact position if he has been put on probation immediately before the appointed day? Is his probation officer transferred from Devon to Cornwall? This is an important aspect. The same argument applies to the provision in respect of children. There is a strange thing about Article 13(2), which is an extremely important provision. The Cornwall County Council "may" take over the care of the child with the concurrence of the local authority. So this is a purely permissive paragraph. Why is it permissive? It seems strange that there will be children who will be staying in the care of Devon County Council. One would have thought that it would be better to arrange for the children to be taken into the care of the Cornwall County Council. If the provision is left permissive, a terminal date for the transfer, whether in two or three years' time, should be given.
The education provisions are a little more complex and give rise to a little more anxiety. Only primary schools are affected by transfer from Devon to Cornwall, and they are not necessarily up to as high a standard as one would like. It may well be that minor works need to be done to the primary schools in the areas being transferred. I see no provision for the Cornwall County Council to get extra grants from the Ministry of Education should it so desire. Like other authorities, the Cornwall County Council is very pushed for money in present circumstances, particularly for minor works and improvements to existing school facilities. Numerous cases could be quoted of primary schools needing things done. One would like to see an extra allocation being made this year for all the primary schools which are being transferred. One would like to know that sufficient cash will be made available on a fair basis for the three schools being transferred from Devon to Cornwall in which works need to be done. It is important that we should know this. Otherwise there may be great difficulty over the estimates.
The provisions concerning transfer of staff are extremely good, and I compliment the Minister on them. It is laid down that the terms of employment to be offered to the staff should not be any less


favourable than at the moment. This safeguards the position of anyone employed by the education authority. It is a good safeguard, and I welcome it. Article 15(5) concerns education, and one notices in the last two lines:
…it shall be the duty of such council to make the remaining payments in pursuance of that grant,…
This is a grant outside. I would like to know what will be the position over university grants, scholarships and grants outside the country which are made by local education authorities, under their own systems. It could be that some child expecting to go from a secondary school to a university who is at present residing in Devon might find her hopes dashed, or otherwise, by this change. What kind of provisions have been made to ensure that this does not happen?
Article 19 deals with executive councils, and it is extremely important to know what are the provisions affecting the Cornwall Executive Council. What powers will it be taking over? There is a strange omission in Article 20 in that the medical officer of health of the present council which is being extinguished, Broadwoodwidger, has a duty laid upon him to report to the Holds-worthy Council on public health matters in the area being transferred. There is no such duty laid upon him to report to the Launceston R.D.C. Why should there be a duty in one case and not in another?
Turning to planning provisions, one hopes that there will be no delay over planning applications already en route, through new applications, new examinations and new searches having to be made by the new county council. I have read the paragraphs of Article 24 carefully, and although there are certain safeguards I am not satisfied that there could not be additional planning delay owing to the transfer. At this stage one would accept an assurance from the Parliamentary Secretary that there will be no delay and that he will bend his best efforts to this end.
A minor point about motor vehicle driving licences arises under Article 27. This function is being transferred for the people concerned from Devon to Cornwall. One knows how full the lists are in Cornwall and one would like to know what provisions will be made to

overcome the additional load—it will be an extra 900 to 1,000—placed on the existing testers. As far as I can make out tests will have to be taken in Launceston, and I know how busy they are.
Turning now to Article 33, one sees that the byelaws now existing in Cornwall will apply to the new areas coming into the county, and the same thing applies in Devon, except that those people in Devon already know them. But, as far as the Cornish side is concerned, what provisions are made so that people transferred to Cornwall are made aware of the byelaws? Heaven knows, it is easy enough to transgress the law, and it would be a pity if provision were not made so that the people transferred are given an opportunity of knowing the important byelaws which are in existence in Cornwall. How are they to be advertised, and who is to pay for the advertising? Perhaps the Parliamentary Secretary can make mention of that in his reply.
I am a little apprehensive about local land charges registers, because it seems from the advice given in Article 37(7) that would-be purchasers have to make two searches not only in Cornwall but in Devon as well if he wishes to purchase a property in the part which is being transferred. That may mean an added cost, and I cannot see why it should be borne by the individual who wishes to go into that area. I am wondering what provisions the Parliamentary Secretary intends to make for that.
I come next to a most important point about the rating position, because it is one of the more complicated provisions in the Order which, heaven knows, is complicated enough. My future constituents would be content if the Parliamentary Secretary can give an assurance to the House that those people who are being transferred from Devon into Cornwall will not pay rates during the coming year which are greater than they would have paid if they had not been transferred.
So far as I can make out, in Article 40 and those following there are special provisions made for that, but I am not exactly sure what the effect of Article 41 will be on the rating position in these areas or on the general rating position


of the two counties. Perhaps the Parliamentary Secretary could elaborate briefly on that point and give the assurance that we would like.
Article 48 deals with security for loans, and there is a strange use of the word "indifferently" which I have not seen before. It occurs in the phrase
…any liability or part of a liability charged indifferently on all the revenues of a public body".
I am not a lawyer, and that may be why I do not understand the phrase, but it seems a rather odd way of putting it, and perhaps we could have some explanation from the Parliamentary Secretary.
The last important matter concerns the transfer of officers. Quite obviously, the officers who are at present serving the rural district council of Broadwoodwidger will lose their employment, and I say straight away that the provisions in paragraph 52 and onwards are very fair indeed. In addition, the provisions that have been made for the Minister to keep a sort of watching brief to ensure that council employees and local government officers are not stranded and left high and dry are satisfactory. But what is the reason for Article 52(4)? Why is it that the Contracts of Employment Act shall not be regarded as a statement of new terms and conditions of employment for the purposes of the transfer of a particular officer from the dying to the new council? I think that there is some simple explanation for this, but for the peace of mind of the local government officers concerned, I hope that the hon. Gentleman will tell us the purpose of this provision.
I hope that he will also assure us that, if it is humanly possible, no officer who is employed at the moment and who wishes to continue to work with one of the two new councils will be denied the opportunity of doing so, and that he will be able to continue there at his present salary. I understand that this is catered for, but an assurance from the hon. Gentleman on this point would be very welcome indeed.
I think that there is some doubt about the compensation provisions in Article 53(b) where it says:
the compensating authority shall be—
(i) in the case of loss of employment or loss of emoluments, the authority by whom the person is last employed or the emoluments

are last paid, as the case may be, before the loss is suffered.
It specifies the authority which will have to pay compensation, and that is fine, but what will happen if the last employing authority was the one which is extinguished by this Order? The appointed day is 1st April, 1966. The authority in question will have ceased to exist, and therefore nothing will happen. I hope that the hon. Gentleman will be able to clear up this point.
In Article 54(5), on page 26, one sees the words
if he has continued in their employment without a break of 12 months or more…
Are those words and the time factor on all fours, and what is the purpose of making it a 12-month period?
I think the House will agree that the pension provisions in paragraph (7) on the same page are adequate and quite generous. On the whole the provisions with regard to local government officers are right and proper, and I do not think that they will be prejudicial to those who are employed.
Those are the main points that I wish to raise on this Order. We are glad that the Government have brought it in. The points which I have raised are those which have given cause for anxiety among the 1,000 people affected, some to a greater degree, and some to a lesser extent.
I extend a welcome to those who are coming to Cornwall, and I hope that they will be happy under their new council. We in Cornwall will do all that we can to make them welcome in our community.
I turn now to the other Order with which we are concerned. This goes much wider than the other one, and most of its provisions are the same as in the Order which we have been discussing in detail, but I should like the Joint Parliamentary Secretary to tell us why Devon and Cornwall have been included in this Order which deals with Somerset, Dorset, Gloucestershire and other parts of Eastern Devon. What is the point of including the areas which we have been discussing in the other Orders?
Returns by medical officers of health are dealt with in the first Order, but returns for the tranferred areas in Dorset, Gloucestershire and Somerset are not


mentioned in the South Western Counties Order.
I do not want to speak any longer, because I think that this matter has been aired sufficiently, and I am grateful to the House for listening to me with such patience.

10.55 p.m.

Sir Henry Studholme: I want to refer to the Broadwoodwidger Order, No. 2087. I am very glad that my hon. Friend the Member for Cornwall, North (Mr. Scott-Hopkins) put down this Motion, because this is the only way in which we can discuss an Order of this nature. I do not oppose the Order. No representations have been made to me in opposition to it. It seems to be an Order which is generally dictated by common sense. On looking up the ancient records, I find that at the time of the Domesday Book this small enclave, consisting of North Petherwin and Werrington, West on the Tamar, was included in the County of Devon, but although I shall always be a Conservative I see no reason why I should be conservative enough to oppose the Order. I am all for change when it is sensible.
I shall lose a number of very nice constituents across the Tamar, who will shortly be included in North Cornwall, I support the Order. I am glad that the Minister will have an opportunity of clearing up the various points which have been raised by my hon. Friend the Member for Cornwall, North.

10.56 p.m.

Mr. Peter Mills: I am glad of this opportunity of saying a few words on the Order. I took the opportunity, before the debate began, to ask my hon. Friend the Member for Tavistock (Sir H. Studholme) whether I might do so, because this area is in his constituency and not mine. The reason why I want to say a few words and ask a few questions is that this is the area in which I have lived for many years. Indeed, all these parishes are right on my doorstep, in the parish of Luffincott. These changes are taking place in a truly rural area of West Devon and I welcome them.
Nothing but good can come out of them. I have consulted many people in my area on this subject and most of them

agree with what is going to happen. I have talked to one of my friends who is a county councillor for that area—Bert Moon—and he is for these changes, as is the Chairman of Holsworthy Rural District—Prebendary James. He has done a very good job in all these discussions and all that has taken place.
The way the boundary has run in the past has always been something of a mystery to me. It is extraordinary to have this piece of Devon jutting across the Tamar and into Cornwall, because the Tamar is the great dividing line running from the Tamar Lake to Plymouth. It is always said in this area that things are different across the river. We even go so far as to say in my parish that "across the river they be furriners", and such things as, "Doan't 'ee marry a Cornish maid". There is a very big dividing line between Devon and Cornwall, and the Tamar is the natural boundary. This Order provides a sort of squaring up of the situation.
All these boundary reorganisations and local government reorganisation in this area are object lessons for many other parts of the country. The people concerned, including the hon. Member for Tavistock, are to be congratulated.
I believe that the alteration of areas laid down in Article 15 is right, the Tamar being the natural boundary. On the other side of the Tamar, people look towards Truro and on the Devonshire side towards Exeter, and now there can be no mistake about it. In considering Article 6, I think we ought to put on record our thanks to those on the Rural District Council of Broadwoodwidger who have done such an excellent job. I am not sure about the last part of that Article:
…shall before that day liquidate all current liabilities incurred by them.
Would the Parliamentary Secretary say whether this is possible?
I welcome the increase from 30 to 36 in Article 7 on the rural district and parish councils, but I am not sure that St. Giles on the Heath ought not to have two councillors instead of one, but I am grateful and pleased to see that Virgin-stow at last has one as well.
I am slightly concerned about Article 13 and I do not know whether I agree with my hon. Friend the Member for Cornwall, North (Mr. Scott-Hopkins) about this. I should have thought that, if a


child was under the care of a particular council at the moment, he should continue to be, because no children like change. If they are under the care of a certain council at the moment, they should not change until they are out of the care of the council.
On Article 15, which deals with education, I trust that the children will look towards Holsworthy Secondary Modern School when the reorganisation takes place, and when the time comes for them to take secondary education. Holsworthy School seeks to enlarge and become a comprehensive school. I think that it is necessary for it to have a bigger "pupil shed", a bigger area from which to draw pupils, so that it can become a bigger and more successful school.
I welcome the words in Article 15 (2, b) that:
…any agreed syllabus of religious instruction under section 29 thereof, being a direction or syllabus in force immediately before the appointed day, shall continue in force until replaced by a further direction…
It is most important for the church primary schools in this area that the agreed syllabus should continue and I hope that this will be so.
There are two small matters arising from Article 55 which I should like the Parliamentary Secretary to explain. One concerns the words:
…any ecclesiastical parish or district".
Being a member of the Church Assembly and particularly interested in these matters in this area, I believe that changes are on the way and I hope that the Order will in no way stop change in this direction.
I notice that nothing is said about where the farmers will look for their authority. Will it be to Truro or to Exeter? At present, in Winton and Broadwoodwidger they look towards Exeter. Will they not in future look towards Truro for the administration of their agricultural affairs? This is a small point, but one which is worth noting.
I welcome this change. It is a tidying up operation and the whole area is to be congratulated upon what has been done. From the point of view of local government reorganisation, this is an object lesson to many other areas.

11.5 p.m.

Mr. Robert Cooke: I have no wish to trespass on the preserves of my hon. Friends. My interest was

considerably aroused when I saw that the Order was down for debate this afternoon. I have three questions to put to the Joint Parliamentary Secretary, particularly since I feel that the Order could form a precedent for other Orders. I wish to ensure that certain positions are safeguarded.
First, are parish meetings affected by the Order? Parish meetings are in a special position and sometimes there is an advantage in their being maintained rather than being amalgamated into parish councils. I am the chairman of the Athelhampton Parish Meeting. On one occasion I assisted in preventing my parish from having to pay for the street lamps and drains of Puddletown. I wish to prevent amalgamations in certain cases and to ensure that under the Order parish meetings are safeguarded. Secondly, could any manorial rights be in any way disturbed by the Order? Thirdly, are there any rights of presentation of livings which could be disturbed by these provisions?

11.6 p.m.

Mr. John Hay: The House will have a certain degree of sympathy with the Joint Parliamentary Secretary because he has had to bring forward two extremely complicated Orders—complicated in form, although their purpose is quite simple. I am sure therefore, that he does not complain about my hon. Friends and I asking a number of questions about these provisions.
As my hon. Friend the Member for Bristol, West (Mr. Robert Cooke) pointed out, this might well be taken as a precedent. We must be absolutely clear about what some of these rather complicated provisions mean. Certain words used in the Orders are bound to give rise to confusion. Perhaps this is because of the form in which they have, by law, to be written. Certainly anything the Joint Parliamentary Secretary can do to clear up any misunderstanding will be welcomed.
I have a number of questions to put to the hon. Gentleman and my remarks underline what my hon. Friend the Member for Cornwall, North (Mr. Scott-Hopkins) said. Article 13(2) relates to children in care, but it is not clear what exactly will happen in future in respect of children in the county transfer areas. The provision gives the County Council


of Cornwall power to take over the care of a child with the concurrence of the local authority in whose care he then is. However, it is not clear whether that power is given only in respect of children in the county transfer area or whether it is a general power conferred on all children in the county district.
I am particularly concerned about Article 24(9), which deals with I.D.C.s issued under Section 38 of the Town and Country Planning Act, 1962. It states:
Any industrial development certificate…issued in respect of any land in the existing rural district of Broadwoodwidger, Holsworthy or Launceston shall continue…
That one can understand. It preserves I.D.C.s, but it goes on:
…as if this order had not been made".
I do not understand the purpose of those words. If the Joint Parliamentary Secretary could throw some light on the reason why that exception is there I should be obliged. I will not comment further on this matter because time is short and we wish to allow the hon. Gentleman time in which to reply. Although I could give a number of other examples, I would refer in particular to Articles 33 and 34. My hon. Friend the Member for Cornwall, North, has referred to Article 33, which deals with byelaws. We should like an assurance about what is to be done in respect of publication or generally making known to the people who are to be transferred into the County of Cornwall the effect of the byelaws in that area.
The House will see that Article 34 deals with compulsory purchase orders that have been submitted to the Minister for confirmation before the appointed day. It makes it clear that these orders may be amended by the Minister by substituting the name of another authority as the acquiring authority. Here, again, I ask: what is to be done to ensure that the owners of the land or interests to be acquired by these compulsory purchase orders will be informed of the fact that the authority which is to acquire their land or interests has changed by Ministerial order?
Lastly, I turn to Article 53. The House will recollect that Article 6 provides for the winding-up—if I may use that expression—of the rural district council of Broadwoodwidger, its dissolution

on the appointed day and the obligation to liquidate all current liabilities incurred by the rural district council as far as practicable before the appointed day. But in Article 53(b, i) we read that the compensating authority in respect of any person who suffers loss of employment or loss or diminution of emoluments is to be
…the authority by whom the person is last employed or the emoluments are last paid, as the case may be, before the loss is suffered…
If the officer concerned was an employee of the Rural District Council of Broadwoodwidger, and if that authority has been wound up in accordance with the provisions of Article 6, how is that position squared with the words used in that part of Article 53?
I do not know whether the hon. Gentleman can answer that question off the cuff—I know that it is rather difficult to answer—but it is something that should be looked at, because the last thing we want to do is to leave in any kind of doubt the rights and liabilities of the individual officers of these local councils.
Apart from that, I agree with my hon. Friend that although we were obliged to put down Prayers to annul the two Orders, as a method of obtaining this short debate on some of their provisions, we should not press the matter to a Division.

11.13 p.m.

The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. James MacColl): As has been said, one happy feature of these Orders is that they are generally approved. They were approved by the last Government. They are approved by this Government. They are approved by the two county councils, by the district councils and by the parishes concerned. There is a remarkable degree of unanimity and, if I may say so as a northerner, I think that it shows a high level of civilisation in the South-West which I hope will be followed in other places.
I should like first to deal with as many of the points as I can read in my notes, and if I either get them wrong or miss any of them I will certainly write to the hon. Member for Cornwall, North (Mr. Scott-Hopkins) about them. The appointed day is 1st April, which is defined


in the Orders. Outstanding liabilities which are not paid off by the rural district council will be transferred to the Hols-worthy R.D.C., so that they will remain in the County of Devon—

Mr. Hay: Under what provisions is that?

Mr. MacColl: I may find that later on, but as I am rather anxious about the time I would prefer not to start looking for it now.
As to representation on the rural district council in the new areas, it is quite true that although the number of councillors has gone down, the ratepayers are still well represented in comparison with other parts of the receiving rural district councils. If it is found that this is an unreasonable arrangement, the county council has powers to increase the number of members. The elections must take place before 1st April and it is for the returning officer to arrange for the elections, not for us.
The reason for the situation in regard to the water board is that Launceston has already representatives on the board. The result of the change will be to avoid double representation.
The question about probation officers is one for the Home Office. I can only pray in aid my experience in the days when I was a magistrate to say that courts normally have a great deal of power to make adjustments if necessary about probation orders if there are any special reasons for leaving a person in the care of a particular probation officer.
A number of points were raised about education, about grants and so on. These I think are essentially matters for the local education authorities. As this is an agreed Order, these are matters which local education authorities can be left to adjust between themselves.
I was asked why the medical officer of health would report only to Hols-worthy R.D.C. One answer is that his report will deal with a period when Broadwoodwidger was in Devon. It is not for me to say whether life in Cornwall will lead to an improvement in health or not. That is a matter for report to Launceston because then those people will be citizens of Launceston.
As to the additional load on driving examiners, it will not be a large amount. No doubt it can be dealt with in consultation with the Minister of Transport. Similarly, on the point raised by two hon. Members about byelaws, responsibility for seeing that the byelaws are advertised will be with the authority which makes the byelaws. It is in its own interests to see that the byelaws are known and I am sure that it will see to that.

Mr. Hay: I know that time is short, but this is a somewhat important point. Will the hon. Gentleman give an undertaking that he will bring it to the attention of the council concerned? I think it vital that it should take every step open to it to bring the byelaws to the attention of its new citizens.

Mr. MacColl: I will certainly look at that. I would not like to give an undertaking about it because I do not see any reason to suppose that responsible local authorities will not carry out their responsibilities in the matter. I shall certainly take advice to see whether there is anything more that we can do.
I was asked about the rather complicated formula—which I agree is complicated—about differential rates. Although it is complicated, it is common form and is fairly familiar in local government Orders. Roughly, what it means is that the rate paid by the area coming into the new rural district council is its old rate, plus any increase in the receiving local authority rate, plus 6d. So that there will be, by degrees, a creeping adjustment of the differential by sixpences every year, and it will not take very long before they reach the same level as the receiving authority.
I was asked some questions about the transfer of officers. The happy situation here is that all the senior officers of the dying R.D.C. are also officers of the receiving R.D.C., so that there will be no difficulty with them at all. Everyone will be transferred to the new authority, and, if any officers suffer a change of employment or a reduction in level of employment, the matter will be in the hands of the new authority, which will be the compensating authority.
I was asked why Cornwall got into the general Order. This arose because a quite different point was being dealt with there, the boundary adjustment of the Tamar.


The effect now—it is not, I think, unique though it is an unusual feature to find in an Order—is that the boundary is in the middle of the Tamar for the time being, which means that, as the Tamar fluctuates in its course, the boundary fluctuates similarly.
I was asked whether the powers regarding children in care would apply only to the new area or whether it was a general power. The answer, I am sure, is that this Order cannot go beyond its purpose and scope, that is, adjustments made as a result of the change of boundaries. We cannot alter the Children Act in a general way. Therefore, these powers will apply to those who may be subject to a transfer from one children's authority to another.

Mr. Hay: It is quite definite, is it, that there will not be a child left hanging in the air, so to speak, without a particular local authority holding responsibility?

Mr. MacColl: Yes. The children will remain, by agreement, with one authority or with the other.
The hon. Member for Torrington (Mr. Peter Mills) raised some points about syllabuses and so on which are really matters for the local education authority to settle. I am sure that it will do that wisely. As regards agriculture, I imagine that people will look to Truro or to Exeter, according to whether they are in Cornwall or Devon after this operation.
I was asked about ecclesiastical parishes. It is said within the Order itself that it does not affect ecclesiastical parishes. If it does not affect ecclesiastical parishes, I think one may assume that those authorities which want to alter such parishes will do so according to the powers they have under other Measures or statutes.
I do not know the answer to the question asked by the hon. Member for Bristol, West (Mr. Robert Cooke) about the possible effect of the amalgamation in abolishing parish meetings. If I find that there is something I should have told the hon. Gentleman in this connection, I shall let him know. I should not like to think that he was to be deprived of his chairmanship because of some skulduggery under the Order. As far as I know, it will not arise. Further, I do not think

that the Order affects manorial rights, and I am sure that I can say with considerable confidence that it does not affect rights of presentation of benefices.

Mr. Scott-Hopkins: In view of the kind and helpful way in which the Parliamentary Secretary has dealt with the points we have raised, and his assurance that, if he finds, on reading the debate tomorrow, that he has not answered all our questions, he will write to hon. Members concerned, I beg to ask leave to withdraw the Motion.

Motion, by leave, withdrawn.

CONSOLIDATION, &c., BILLS

Mr. Edward Gardner discharged from the Select Committee appointed to join with a Select Committee appointed by the Lords on Consolidation, &c., Bills and Mr. Percy Grieve added.—[Mr. Gourlay.]

DISPOSAL OF ABANDONED CARS, &c.

11.25 p.m.

Mr. John Cordle: I beg to move,
That leave be given to bring in a Bill to provide for the disposal of abandoned cars, derelict agricultural machinery and equipment, and bulky rubbish; and for connected purposes.
It is not my intention to delay the House any longer than is necessary, because my hon. Friend the Member for Maldon (Mr. Brian Harrison) has an important Adjournment debate to follow.
It is my wish to ask leave of the House to bring in a Bill that will deal with a growing problem, largely a new one and deriving partly from affluence, that requires urgent action. With the explosive car population of 8·2 million cars using our roads today, together with another 4 million vehicles, making a total of over 12 million in the restricted area of this country, the problem is understandable.
Every day of every week of every year, literally hundreds of old cars, vans, agricultural implements and other large, worn out consumer durables are abandoned on our streets, in our fields and on our open spaces. In the Greater London area, up to 500 vehicles are abandoned each week, and as more and


more cars come on to the roads so the number of old and abandoned vehicles will rise.
This problem is not confined to the cities and the large towns. Many country lanes are lined with old cars lying rotting in the ditches, a hazard to life and limb and often interfering with drainage. Fields and pastures can be partially sterilised by large and unwanted rubbish and apart from reducing the effective acreage it is extremely dangerous to livestock and to riders.
The case history of an abandoned car is simple and repeated all over the country. The car comes to the end of its life. It is probably already in a poor state of body work and mechanical order. If the owner is conscientious, he will approach the local authority or a car dealer to dispose of it. More likely, however, he will one night drive it, tow it or push it to some street, lane, car park or field, remove the battery and any other valuable parts and then leave it slowly to rust away.
Children will find this new plaything or toy. Some will get cuts or grazes from rusting body work or cuts or lacerations from broken glass. A few will die or be badly burnt when, foolishly, they bring a naked flame near the petrol tank or fuel system that may retain petrol vapour and fumes for a considerable period.
Eventually, if the local authority is alert to its responsibilities, the vehicle will be removed, but the delay usually runs into months. Apart from the possible damage to life and limb, apart from the economic considerations of sterilising good land and interfering with drainage in the countryside, there is the appalling ugliness and aesthetic offence caused by this super-litter. Heaven knows, there are enough existing man-made blots on our beautiful country without adding any further to them.
The question is, then, what must be done? Some local authorities are already displaying great initiative and are energeticaly tackling the problem. I understand, for example, that the London Borough of Islington has done some research and found out that under the new Highways Act it can treat abandoned cars as dangerous litter and clear them off the streets much sooner than was possible before.
A warning notice is displayed on an abandoned car for seven days and if it is not removed by the owner or late owner it is cleared away by the council and fed into a giant metal crushing machine.
Westminster Council has started a scheme whereby owners who wish to dispose of their vehicles get in touch with the council which, for a fee of £2, collects the vehicle and disposes of it. The council also takes away the vehicle's log book as a safeguard and has it destroyed by the licensing authority. The initiative of these two authorities—and there may well be others—highlights the fact that in most of the country there is virtually no provision for prompt disposal of such large and cumbersome litter.
The problem seems to fall into two parts: first, vehicles and implements abandoned on public property, such as roads, car parks, commons and waste land, and, secondly, vehicles and implements or litter abandoned on private property and which the owner wished the local authority to remove. The inherent obstacle in charging for the removal of litter is that the dishonest or unscrupulous person will merely dump his vehicle on the street and the local authority is then faced with the full cost of removing it. The time has surely come when we must stop talking about this problem and take some action.
It is unrealistic to expect every local authority in the country to have its own vehicle-crushing plant. The cost would be prohibitive to many councils and the majority of plants would be grossly underutilised. What is required is for authorities at county council and county borough level to operate such crushing equipment, possibly in co-operation one with another, or to enter into a contract with local scrap firms who could provide such a service for the local authority. The smaller local authorities, such as the urban and rural district councils, would have to act as agents for the first tier authorities as in many areas they act as the authority primarily concerned with refuse disposal.
Local councils should be compelled to remove large litter, such as vehicles and implements from public places after a short statutory period of, say, a fortnight, during which time a warning notice would be displayed on the offending object. They would also be compelled to dispose


of similar refuse from private property at the owner's request. The local authorities, in co-operation with the Ministry of Housing and Local Government, should be required to draw up suitable schemes so that the whole of the country would be effectively covered while the type of plant and equipment could be properly evaluated for the guidance of all concerned.
This will not be an easy matter to get started. It will cost much time and money, but that is no excuse for delaying action, because the price of inaction is already too high in injured children, injured livestock and the growing unsightliness of our towns and countryside.
I do not believe that we should be very optimistic about the value of scrap realised in such an operation. I understand that the top price for clean baled scrap steel is about £12 a ton. This is shared over several operators at different levels in the scrap trade. The cost of reclaiming non-ferrous metals is so high that it is usually not an economic proposition. There may be a market for using baled and compressed vehicles as cones or cores for concrete blocks which could be used in a variety of civil engineering work and I understand that studies regarding the feasibility of this on a large scale are already taking place. A company in my area, Poole, called Enefco Consulting Engineers, has done valuable work in this direction.
One of the promising schemes which might be seriously considered is for old unwanted chassis to be loosely baled and then injected, as it were, or placed in the centre of concrete blocks to reinforce the concrete block and thus in turn killing two birds with one stone—disposing of the old iron wreck, as it were, and reinforcing the concrete block which could be used for coastal protection. This seems to be one of the best schemes available.
We are contemplating shortly a major project of £82 million creating a dam across the Wash. Surely this is just the sort of concrete block which could well be turned into the 12-mile wall. As a Member for a constituency which has a great deal to do with coastal protection, this suggestion seems to commend itself for that purpose.
We must accept, however, that disposal will cost most local authorities money,

and some of the authorities with big problems, a considerable amount of money. This is not the time to go into detailed financial calculations but suggestions which have been put forward include a surcharge on the manufacturer or a surcharge on the motor vehicle licence to help with the eventual disposal of the vehicle. I am not convinced of the wisdom of such schemes, but they could be seriously considered. Perhaps a fund could be created, called a retirement fund for a motor vehicle, to which the owner would contribute, say, 10s. a year towards the final disposal of the vehicle. This could be handed to the second-hand, third-hand, and fourth-hand buyer of the vehicle until eventually, when the vehicle was discarded, there would exist the wherewithal to offset all the expense of disposal.
Over a million new vehicles come on to our roads each year. With increased prosperity, more stringent safety tests and the planned obsolescence policy of the manufacturer, the average life of the family car is dropping sharply and may soon be only five or six years. Ignoring the present backlog of all cars, this means that up to a million vehicles a year may have to be disposed of in the 1970's. The problem, therefore, is serious and urgent and will soon grow desperate. The case for action now is overwhelming. I commend the Bill to the House and ask leave to bring it in at the earliest possible moment.

Question put and agreed to.

Bill ordered to be brought in by Mr. John Cordle, Mr. Anthony Kershaw, Sir Eric Bullus, Mr. Harold Gurden, Sir George Sinclair, Rear-Admiral Morgan Giles, Mr. Michael Alison, Mr. Peter Mills, Mr. William Wilson, Mr. Carol Johnson, Mr. Robert Cooke, and Mr. Harry Randall.

DISPOSAL OF ABANDONED CARS, &C.

Bill to provide for the disposal of abandoned cars, derelict agricultural machinery and equipment, and bulky rubbish; and for connected purposes, presented accordingly and read the First time; to be read a Second time upon Friday, 11th March, and to be printed. [Bill 71.]

BRAINTREE CATTLE MARKET

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Fitch.]

11.37 p.m.

Mr. Brian Harrison: I am glad to have the opportunity of raising in the House, even at this late hour, the refusal of the Ministry of Housing and Local Government to grant loan sanction for the purchase of Braintree Cattle Market. I do not do so from any form of regional partisanship but because I believe that a genuine mistake has been made here which should be rectified.
Braintree is an attractive rural market town which has adapted itself to an influx of industry and population such as nobody could have imagined prior to the war. Despite this influx and increase, the character of the town has been largely preserved and the central precinct maintained so as to keep the atmosphere of a market town with good, up-to-date shopping facilities. This has been done partly through the magnificent gift of the Courtauld family to the town, but also through the thoughtful planning and development of housing and other development by the Braintree and Bocking Urban District Council. It is in order to continue on these lines that the council sought loan sanction for the purchase of the cattle market, which forms a vital part of the central development area of the town.
In its desire to do this the council was following the instructions of the last Minister of Housing and Local Government, my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) who said, as reported in HANSARD of 18th November, 1963:
It is a corollary of regional planning and development that land planned for major development should be bought well in advance by a public authority for disposal to private enterprise or to public enterprise as required, both to control and phase the development and to help in meeting the cost of bringing it into development."—[OFFICIAL REPORT, 18th November, 1963; Vol. 684, c. 656.]
The same principle appeared in the second section of the White Paper on the Land Commission, Cmnd 2771, brought forward by the Minister of Land and Natural Resources. He gave as his objectives in paragraph 5 in the second

section, first, to secure that the right land is available at the right time for the implementation of national, regional and local plans, and, second, to secure that a substantial part of the development value created by the community returns to the community and that the burden of the cost of land for essential purposes is reduced.
The piece of land in the middle of Braintree falls exactly within the categories described in the second part of the White Paper. Braintree, unfortunately, has already had an unpleasant experience in not being able to purchase part of the land that it needs for developing the centre of the town in time. A block of property, though smaller than this piece, was sold for redevelopment not long ago for about £35,000. The property was gradually cleared of shopkeepers and then sold again. The ownership of the block changed hands three times, and finally it was sold for over £80,000. So the townspeople have to face the position that a private development company is taking nearly £50,000 out of the town for nothing, but, of course, the private profit will ultimately be reflected in the rents shopkeepers will have to pay in the redevelopment of the area which is now taking place. The council, naturally, does not want to see this happen again, and hence its proposal to acquire the Cattle Market site now and ensure that the site does not suffer a similar fate of being sold between development companies at ever-rising prices, which can ultimately only place an intolerable burden on the community.
The site I refer to, which is called the Cattle Market, is of 1·183 acres, and immediately adjoins the Market Square. There is only a collection of old wooden buildings on the site apart from the small office buildings of the owners, Messrs. Balls and Balls. It is of vital importance to any redevelopment of the town centre, and it is the aim of the council to make this into a first-class pedestrian shopping precinct.
The firm which owns the market realises that, because of the new town plan, it must ultimately leave and that it will have to provide a new cattle market on the edge of the town should such a market be proved necessary. Realising


the interest of the council in improving the site, it came to an agreement on 23rd March, 1965, nearly 12 months ago, to sell the site to the council subject only to the granting of loan sanction. At this stage it did not seem likely that this would present any difficulties. The price has been agreed by the district valuer. From my experience, I regard it as a very fair and reasonable price. A less conservative and responsible firm might easily have asked considerably more.
The council wishes to purchase the site now. The auctioneers who own it have agreed to sell it now, and in order to assist the council, they have further agreed to rent it back from the council at a rent sufficient to pay for the interest on the loan which the council will have to raise for the purchase money. In this way it would have seemed that all would have been satisfied. The vendor receives a reasonable price for his land, the council pays a fair price for this vital site, and at the same time it costs it nothing as it has a tenant to occupy the site until it is ready to utilise the land. The council is getting land at a reasonable price, or a price that was regarded as reasonable last year. It can then go ahead with the development when it is ready.
Local Government Circular 6265, published six months ago, prohibited the purchase of land in advance by local authorities. Under this circular the Minister has refused to make loan sanctions. Braintree Council has entered into the spirit of this circular very fully. A special meeting was held to review all the council's expenditure and, as a result, it has deferred seven schemes involving capital expenditure of approximately £100,000. For this reason it feels, and I agree with it, that it is entitled to special concessions so that a large burden will not be inflicted on the community of Braintree and Bocking at a later date when it could be saved now by the purchase of this site on advantageous terms.
There is a further reason. Braintree Council is in an advanced state of negotiations with the Greater London Council for the provision of overspill. Already a meeting has been held at officer level and the financial provisions have been discussed. These have been reported to

the council and a further meeting of members has been arranged. It is obviously vital, if the other areas which Braintree now holds for building are to be developed either for ordinary council building or for overspill, that the Braintree Cattle Market should be obtained for adequate development for the community.
Tomorrow morning the hon. Gentleman has, with his usual courtesy, agreed to meet a deputation from the Braintree Council to discuss this matter. I realise that he has a very busy morning and I know that he is extremely hardworking at all times. If he feels that the Braintree and Bocking U.D.C. has a strong case and that he can say "yes" to its request for loan sanction, I am sure that I can arrange, even at this late hour, to cancel the deputation, so that he will have one less engagement tomorrow. For the reasons which I have outlined, I hope that he will look sympathetically at the case for the granting of loan sanction to the Braintree and Bocking Urban District Council to enable it to purchase this vitally important site in the centre of Braintree.

11.49 p.m.

The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. James MacColl): It will help to explain why I cannot yield to the plea that the Braintree Urban District Council should be given loan sanction to acquire this site if I fill in some of the background. In recent years there has been a great surge of interest in rebuilding town centres. Many plans have been prepared and some implemented. Characteristically, the rôle of the local authority has been to acquire the land and set the planning framework, while the rôle of private enterprise has been to acquire land either under freehold or leasehold from the local authority and undertake the building. Building of this kind has been in preparation up and down the country, and anxiety has been expressed that in total it would have led to a substantial over-provision of shops. In anticipation of this redevelopment there has been a very rapid increase in the acquisition of land by local authorities with a view to its redevelopment.
The call for loan sanctions for acquisitions under the general powers which local authorities obtained in 1963 to buy


land for the benefit and improvement of their areas rose from some £7 million in 1962–63 to £21 million in 1964–65, and would have gone much higher this year but for the Government's measures of last July. These acquisitions were to a considerable extent in town centres, and there were also similar acquisitions under planning powers. It is plain that, as things were going, the demand for loan sanctions under these heads would have continued to rise steeply. These schemes also represented a significant prospective load on the building industry.
In the Government's measures of last July, we called a temporary halt and deferred, except where there were very special reasons against doing so, the purchase of land in advance of requirements and town centre redevelopment projects. As my right hon. Friend the Chancellor told the House last week, these Measures have achieved their purpose, and we can now return to more normal methods of control. But, in reprogramming our investment, it is still necessary to keep expenditure within limits which we can afford. This means that we must continue to keep a tight rein on these particular forms of investment. At the same time, we have introduced the Building Control Bill which will bring under licensing most of the private investment in these redevelopment schemes, in order to make sure that demand and supply in the construction industry keep in step and that social needs—for example, for housing—have priority.
We must recognise the plain implication that the scale of expensive reconstruction of town centres will have to be regulated by priorities. Of course, that cannot be done on a short-term basis. Redevelopment schemes take a long time to carry through, and local authorities must be helped to know where they stand. My right hon. Friend therefore intends to construct a forward programme of redevelopment schemes selected on tests of priority, and he will shortly issue a circular to local authorities about this, after consultation with the local authority associations.
I am afraid that it will mean a continuance of severe restriction on the purchase of land in advance of requirements and a very critical examination of proposals for central urban redevelopment. As I said, the details will be set out in the circular.
The only real comment that I have to make on the fair deployment of his case by the hon. Gentleman is that everything that he said is perfectly reasonable, but that everything he said can be said for so many other local authorities which are in the same position and which have perfectly good schemes which they are anxious to carry out. The problem is how to sort them out.
I do not in any way reflect at all on the prudence and competence of the urban district council, nor do I suggest that the price is in any way an unreasonable one, nor that it would not be a wise investment to buy the land in anticipation of requirements. The trouble is that the cumulative effect of individually prudent purchases can be inflationary and can place an intolerable burden on the finances of the country. We have had the unpleasant job of having to say "No" to quite a number of local authorities who would, quite rightly from their own point of view, like to go ahead because of the advantages of buying the land before development values accrue, so that they know that they can lay out their plans.
All that I can say to the hon. Gentleman is that certainly this scheme is not killed. If the opportunities come in the future to give loan sanction, we will give it. I recognise that that does not meet the point that the local authority wants to take advantage of buying it now. On the other hand, it would be buying in advance of requirements. There is no question of its being used immediately, because I understand that the owners are still in occupation and that, even if it is sold, it will remain in their occupation for some time.
The hon. Gentleman raised the question of overspill, and this again is a matter which would affect the situation. If a town development agreement were made with the Greater London Council, undoubtedly it would come into consideration.
What I have to say to the hon. Gentleman is what one has to say to many local authorities with equally strong cases, that in sorting out priorities somebody has to be disappointed. This is the sad task which faces my right hon. Friend, who is not by nature a person who wants to stop people from doing things. He is anxious to see a great development in this


work of improving towns, and he would like very much to be able to say to everyone, as his predecessor did, "Go on and do what you can", but we have reaped the consequences of a lighthearted approach to, and easy control of, this problem. We are just beginning to emerge from the difficult situation which arose as a result of that policy, and, as I said at the beginning, I hope that as

a result of the new review of priorities it will be possible to produce a coherent programme of priorities to which we can work. I am therefore sorry to have to say that my right hon. Friend cannot see his way to change his decision on this matter.

Question put and agreed to.

Adjourned accordingly at four minutes to Twelve o'clock.